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STEXREARA ARN 36 069 163 066 - 11

Notice of Annual General kv reteritet ancie de l'antication

Proposed Restructure of Shareholding in NuStar Mining Corporation Limited William

Meeting Documentation Impolate Charges

Notice of Annual General Meeting
Explanatory Memorandum
· Independent Expert's Report
Proxy Form ....................................

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Directors recommend that you vise in invoer of all the considered at the Ammal Creend Meeting.

The Existent Notice

This is an important document and requires your immediate attention You should read all of it before deciding whether or tust to approve the $\pi$ resolutions required to undertake the proposed transaction. If you do not understand any of it or are not sure what to do, please consult your legal or tinancial advisor intraediately. Please express the number is

Important Notices

Read this document

You should read this document in its entirety carefully before making a decision on how to vote on the Proposal and all other resolutions contained in the Notice of Annual General Meeting.

Role of ASIC and ASX

A copy of this document has been lodged with ASIC and ASX. Neither ASIC nor ASX nor any of their respective officers take any responsibility for the contents of this document.

Taxation matters

The Proposal may have taxation implications for Shareholders. This document refers to some of the potential taxation consequences arising from the Proposal. However, as taxation implications may vary amongst Shareholders, Shareholders should obtain professional advice as to their individual circumstances.

Future statements

Certain statements in this document relate to the future. These statements involve both known and unknown risks and assumptions both specific to St Barbara and its business and also relating to the general economic environment. Accordingly, actual performance or events may be materially different to those expressed or implied in those statements.

Defined terms

Certain capitalised terms used in this document are defined in section 11 of the Explanatory Memorandum.

		Page
	Chairman's Letter	4
	Summary of the Proposal	6
	What You Should Do	R
	Notice of Annual General Meeting	9
	Explanatory Memorandum
Ŧ.	Purpose of this Document	12
2.	Overview of the Proposal	19.
3.	Advantages and disadvantages of the Proposal	13
4.	Independent Expert's opinion and Directors' recommendation	14
5.	Resolutions 1 and 2 - Re-election of Directors	15
6.	Resolutions 3 to 5 - Ratification of share issues	16
7.	Resolution 6 - Approval of share issue	17
8.	Resolution 7 - Approval of surrender of Paulsens Royalty	18
9.	Resolution 8 - Approval of Buy-back Offer	19
	10. Resolution 9 and 10 - Approval of issue of initial and further options to Eduard Eshuys	95
	H. Definitions	27
	Annexure A - Employee Option Plan	98

Independent Expert's Report

1989 - Andrea Stadt Gallery, amerikan basis (b. 1989)

28 October 2004

Dear Shareholder

Annual General Meeting - Perth, 29 November 2004

On 20 September 2004, the new Board of St Barbara Mines Limited announced that it had completed a review of the financial position and operations of the Company and as a consequence decided to substantially reduce its shareholding in NuStar Mining Corporation Limited (NuStar) and sell certain assets relating to the Paulsens Project which is NuStar's main asset.

The Board made this decision so that the Company could immediately retire secured debt, unsecured creditors and other short term liabilities, recommence exploration at the Paddy's Flat property at Meckatharra, Western Australia (which is 100% owned by the Company) and investigate other opportunities. The proposed buy-back of St Barbara Shares for NuStar Shares has been proposed to facilitate an orderly separation of the two companies and allow relevant Shareholders to switch their St Barbara Shares into a direct shareholding in NuStar.

The Board appointed Claymore Capital Pty Ltd (Claymore Capital) to assist the Company with four separate, but interrelated, transactions in relation to NuStar and the Paulsens Project being:

(a) the sale of 100 million NuStar Shares to third parties at 4 cents per share. The Company completed this transaction on 30 September 2004;
(b) the surrender of the Company's 5% Paulsens Royalty to NuStar along with the sale of the Company's interest in the Pelican Joint Venture (being exploration tenements adjacent to the Paulsens Project) to NuStar. Agreements with NuStar have been entered into to effect these transactions and NuStar has paid the Company a cash deposit of \$1.165 million as well as paying Claymore Capital \$160,000 in satisfaction of certain of St Barbara's debts to Claymore Capital;
(c) the grant of an option to Claymore Capital to purchase 100 million NuStar Shares at 5 cents per share at any time up to 16 May 2005; and
(d) the offer of a maximum of 240 million of the Company's NuStar Shares to Shareholders in consideration for the buy-back of St Barbara Shares at a ratio of 1.25 NuStar Shares for each St Barbara Share,

(the Proposal).

The surrender of the Paulsens Royalty and the buy-back of St Barbara Shares are both subject to Shareholder approval which the Directors are seeking pursuant to Resolution 7 (Approval of surrender of Paulsens Royalty) and Resolution 8 (Approval of Buy-back Offer) of the enclosed Notice of Annual General Meeting.

To assist in your consideration of the above resolutions, the Directors commissioned an Independent Expert's Report from Deloitte Corporate Finance Pty Limited (Deloitte Corporate Finance) to provide an opinion on whether the proposed surrender of the Paulsens Royalty is fair and reasonable to St Barbara's shareholders and to provide a valuation of St Barbara and NuStar shares to assist Sharcholders in considering Resolution 8.

The Independent Expert's Report has concluded that the surrender of the Paulsens Royalty is fair and reasonable to St Barbara's shareholders and a copy of that report is enclosed.

The Board believes that the successful implementation of all aspects of the Proposal is in the best interests of the Company and is for the Company's commercial benefit as it delivers:

retirement of secured debt of \$3.5 million;
retention by the Company of approximately 102 million NuStar Shares or just over 10% of the NuStar issued capital (assuming Claymore Capital exercises its option to purchase 100 million NuStar Shares);
reduction of St Barbara's issued capital from approximately 715 million shares to approximately 523 million shares (assuming the maximum of 240 million NuStar Shares are transferred as part of the Buy-back); and
provision of working capital to allow the Company to continue its focus on exploration and increasing value to Sharcholders.

I urge you to read the enclosed documentation carefully and either attend the Annual General Meeting or return your completed Proxy Form by the required date.

On behalf of the Board, I recommend that you vote in favour of each resolution to be considered at the Annual General Meeting.

Yours faithfully

far klar

Colin Wisc Non Executive Chairman

Summary of the Proposal

The Proposal

Following a detailed review of the Company's financial position in July and August this year, the Directors identified the urgent need to raise funds. After assessing various capital raising alternatives, the Board resolved that the best available alternative was the realisation of assets relating to NuStar and the Paulsens Project. This would have three beneficial outcomes, being:

the raising of sufficient capital to repay short term secured debt, creditors and other short term liabilities as well as generating working capital for exploration and meeting (reduced) overheads;
the provision of focus to the development of assets that are within the control of the Company's management; and
to allow Shareholders not aligned with the views of the new management of the Company to exit their ownership of St Barbara Shares.

To achieve these outcomes, the Board decided to implement the Proposal, the key transactions of which are summarised below.

(a) Sale of NuStar Shares: the sale of 100 million NuStar Shares to third parties at 4 cents per share. This transaction, which does not require shareholder approval, took place on 30 September 2004 and enabled the Company's secured debt of \$3.5 million to be repaid in full.
(b) Divestment of Paulsens Royalty and interest in the Pelican Joint Venture: the Company's 5% Paulsens Royalty relates to the Paulsens Mining Lease, the key tenement in a project owned and currently under development by NuStar. Both the Paulsen's Royalty and the Company's interest in the Pelican Joint Venture (adjacent to the Paulsens Project) are surplus to the Company's principal tenement position in the Meckatharra region of Western Australia. They do, however offer synergistic benefits to NuStar. Proceeds from the sale of these assets (subject to shareholders approval) amount to \$5.15 million, a significant sum in the context of the Company's financial position prior to the Proposal having been finalised.
(c) Grant of option to Claymore Capital: as described in point (a) above, Claymore Capital successfully placed 100 million NuStar shares to third parties at 4 cents each. The option granted to Claymore Capital or its nominee to purchase a further 100 million NuStar Shares at 5 cents per share up to 16 May 2005 provides the Company with potentially an additional \$5 million. These proceeds will assist in funding exploration of the Company's Meekatharra tenements. The option mechanism reduces the downward pressure on NuStar Shares which could occur if a further 100 million NuStar Shares were to be sold on market, and if exercised, still leaves the Company with a remaining interest of approximately 102 million NuStar Shares.
(d) Buy-back: the Company has actively sponsored the development and growth of NuStar and its principal asset, the Paulsens Project in the Ashburton region of Western Australia.

The planned Buy-back provides Shareholders with a choice:

to remain a Shareholder of St Barbara, with its extensive land position and treatment plant at Meckatharra and its $(1)$ new management team; or
$(2)$ to accept NuStar Shares as consideration for St Barbara Shares under the Buy-back and thus have a direct interest in the Paulsens Project and any future projects planned by NuStan.

The Company's largest shareholder, Resource Capital Fund II, LP (RCF) has indicated its intention to remain a Shareholder of St Barbara.

This section is a summary only and is not intended to provide complete information about the Proposal. Shareholders should read this section in conjunction with all documents in the Meeting Documentation.

Benefits of the Proposal

The key benefits of the Proposal are:

$\bullet$ Financial benefits: the Proposal allows for the retirement of certain debts and provides cash for undertaking future exploration or considering other investment opportunities.
Focus on controlled businesses: the Proposal reduces the Company's overall exposure to NuStar and the Paulsens Project allowing the Company to focus its resources and exploration efforts on the projects it can directly control.
No brokerage: the Buy-back Offer is structured to give Shareholders an equal opportunity to acquire a direct interest in NuStar Shares without incurring the cost of brokerage.
Reduction of issued capital: the Buy-back will result in a reduction in the total number of St Barbara Shares on issue. The Board believes that the investment community is more favourably disposed to Companies with smaller numbers of shares on issue.
Attitude of significant Shareholders: each of Toto Capital Inc (Toto), Strata Mining Corporation Ltd (Strata) and Ocean Resource Capital Holdings Plc (Ocean) has indicated that it will accept the Buy-back Offer. If the level of acceptances from other Shareholders is sufficiently low such that each of those Shareholders is able to be retired from St Barbara's share register, it will remove three Shareholders who in total own approximately 21.5% of the Company and who, the Board believes, have been opposed to the current management and their plans for the direction of the Company.

The Directors believe that the Proposal is in the best interests of Shareholders and recommend that Shareholders vote in favour of the Proposal.

......................................

What You Should Do

Step 1

Read this Meeting Documentation

This Meeting Documentation (incorporating the Independent Expert's Report) sets out the details of the Proposal for Shareholders. This information is important. You should read this document carefully and if necessary seek your own independent advice on any aspects about which you are not certain.

Step 2

Vote on the resolution

Your vote is important. Details of the Annual General Meeting are set out in the Notice of Annual General Meeting included in this Meeting Documentation.

Shareholders should complete the Proxy Form that accompanies this Meeting Documentation and return it in the reply paid envelope provided so as to be received by the Company before 3.00pm on 27 November 2004 whether or not they propose to attend the meeting. Proxy Forms received after this time will be invalid.

For details on how to complete and lodge the Proxy Form please refer to the instructions on the Proxy Form.

The Directors recommend you vote "FOR" each of the resolutions by completing the enclosed Proxy Form.

Questions

If you have any questions about any matter contained in this Meeting Documentation, please contact the Shareholder Information Line on (08) 9476 5555 (within Australia) or +61 8 9476 5555 (overseas).

Key Dates

Deadline for lodgement of Proxy Forms	27 November 2004 at 3.00pm
Date and time for determining eligibility to vote	27 November 2004 at 3.00pm
Date of Annual General Meeting	29 November 2004 at 3.00pm
Buy-back Offer document lodged with ASIC*	30 November 2004
Buy-back Offer opens*	13 December 2004
Buy-back Offer closes*	10 January 2005 at 5.00pm
Dates marked with an asterisk $(*)$ are indicative only
All times referred to are the times in Perth, Australia

Notice of Annual General Meeting

Notice is given that an Annual General Meeting of St Barbara Mines Limited will be held at the Conference Suite, Level 8, Exchange Plaza, 2 The Esplanade, Perth, Western Australia on Monday 29 November 2004 at 3.00pm (Perth time).

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Agenda

Ordinary Business

Financial Report

To receive and consider the financial report for the year ending 30 June 2004, and the directors' and auditor's reports.

Resolution 1 - Re-election of Director

To consider and, if thought fit, pass the following resolution as an ordinary resolution:

"That, Henderson (Hank) G Tuten, being a director of the Company who retires by rotation pursuant to rule $6.3(c)$ of the Company's Constitution, and being eligible, is re-elected as a director of the Company."

Resolution 2 - Re-election of Director

To consider, and if thought fit, pass the following resolution as an ordinary resolution:

"That, Mark K Wheatley, being a director of the Company who retires pursuant to rule 6.3(j) of the Company's Constitution, and being eligible, is re-elected as a director of the Company."

Special Business

Resolution 3 - Ratification of share issue

To consider and, if thought fit, pass the following resolution as an ordinary resolution for the purposes of Listing Rule 7.4 of the Official Listing Rules of Australian Stock Exchange Limited and for all other purposes:

"That the issue on 21 July 2004 of 26,591,453 ordinary shares in the capital of the Company at the issue price of \$0.046 to the persons as described and identified in the Explanatory Memorandum accompanying this Notice of Annual General Meeting is ratified."

Resolution 4 - Ratification of share issue

To consider and, if thought fit, pass the following resolution as an ordinary resolution for the purposes of Listing Rule 7.4 of the Official Listing Rales of Australian Stock Exchange Limited and for all other purposes:

"That the issue on 19 July 2004 of 17,480,547 ordinary shares in the capital of the Company at the issue price of \$0.046 to the persons as described and identified in the Explanatory Memorandum accompanying this Notice of Annual General Meeting is ratified."

Resolution 5 - Ratification of share issue

"That the issue on 19 July 2004 of 42,050,000 ordinary shares in the capital of the Company at the issue price of \$0.04 to the persons as described and identified in the Explanatory Memorandum accompanying this Notice of Annual General Meeting is ratified."

Resolution 6 - Approval of share issue

To consider and, if thought fit, pass the following resolution as an ordinary resolution for the purposes of Listing Rule 7.1 of the Official Listing Rules of Australian Stock Exchange Limited and for all other purposes:

1989 - Andrea Stadt Britannia (h. 1989).

"That the Company is authorised to issue ordinary shares in the capital of the Company to Resource Capital Fund II, LP in accordance with the terms described in section 7 of the Explanatory Memorandum accompanying this Notice of Annual General Meeting."

Resolution 7 - Approval of surrender of Paulsens Royalty

To consider and, if thought fit, pass the following resolution as an ordinary resolution for the purposes of Listing Rule 10.1 of the Official Listing Rules of Australian Stock Exchange Limited and for all other purposes:

"That the Company is authorised to surrender the Paulsens Royalty to NuStar Mining Corporation Limited on the terms and conditions set out in the Explanatory Memorandum accompanying this Notice of Annual General Meeting."

Resolution 8 - Approval of Buy-back Offer

To consider and, if thought fit, pass the following resolution as an ordinary resolution for the purposes of Part 2J.1 of the Corporations Act and for all other purposes:

"That the Buy-back Offer is approved and the Company is authorised to buy-back and subsequently cancel up to 192 million ordinary shares in the Company in consideration for the transfer to accepting shareholders of up to 240 million ordinary shares in NuStar Mining Corporation Limited on the terms and conditions of the Buy-back Offer and as set out in the Explanatory Memorandum accompanying this Notice of Annual General Meeting."

Resolution 9-Approval of issue of initial options to Eduard Eshuys

To consider and, if thought fit, pass the following resolution as an ordinary resolution for the purposes of Listing Rule 10.11 of the Official Listing Rules Australian Stock Exchange Limited and for all other purposes:

"That, in part consideration of his employment as Managing Director and Chief Executive Officer of the Company, Eduard Eshuys be issued 15,000,000 options to acquire ordinary shares in the capital of the Company on the terms and conditions set out in section 10 of the Explanatory Memorandum accompanying this Notice of Annual General Meeting."

Resolution 10 - Approval of issue of further options to Eduard Eshuys

To consider and, if thought fit, pass the following resolution as an ordinary resolution for the purposes of Listing Rule 10.11 of the Official Listing Rules of the Australian Stock Exchange Limited and for all other purposes:

"That, in part consideration of his employment as Managing Director and Chief Executive Officer of the Company, Eduard Eshuys be issued 20,000,000 options to acquire ordinary shares in the capital of the Company on the terms and conditions set out in section 10 of the Explanatory Memorandum accompanying this Notice of Annual General Meeting."

Explanatory Memorandum and Independent Expert's Report

Sharcholders are referred to the Explanatory Memorandum and the Independent Expert's Report accompanying and forming part of this Notice of Annual General Meeting.

Entitlement to vote

Snapshot date

It has been determined that under Corporations Regulation 7.11.37, for the purposes of this Annual General Meeting, St Barbara Shares will be taken to be held by the persons who are the registered holders at 3.00pm (Perth time) on 27 November 2004. Accordingly, share transfers registered after that time will be disregarded in determining entitlements to attend and vote at the Annual General Meeting.

Voting entitlement

In relation to Resolution 3, pursuant to Listing Rule 7.5.6 of the Official Listing Rules of Australian Stock Exchange Limited, the Company will disregard any votes cast by Resource Capital Fund II, LP or any of its Associates.

In relation to Resolution 4, pursuant to Listing Rule 7.5.6 of the Official Listing Rules of Australian Stock Exchange Limited, the Company will disregard any votes cast by Ocean Resource Capital Holdings Plc or any of its Associates.

In relation to Resolution 5, pursuant to Listing Rule 7.5.6 of the Official Listing Rules of Australian Stock Exchange Limited, the Company will disregard any votes cast by Spartan Nominees Pty Ltd, any of the relevant clients of Gillon Securities Ltd or any of their Associates.

In relation to Resolution 6, pursuant to Listing Rule 7.3.8 of the Official Listing Rules of Australian Stock Exchange Limited, the Company will disregard any votes cast by Resource Capital Fund II, LP or any of its Associates.

In relation to Resolution 7, pursuant to Listing Rule 10.10.1 of the Official Listing Rules of Australian Stock Exchange Limited, the Company will disregard any votes cast on the resolution by NuStar or its Associates.

In relation to Resolutions 9 and 10, pursuant to Listing Rule 10.13.6 of the Official Listing Rules of Australian Stock Exchange Limited, the Company will disregard any votes cast on these resolutions by Eduard Eshuys or any of his Associates.

However, the Company need not disregard a vote if:

it is east by a person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or
it is cast by the person chairing the meeting as proxy for a person who is entitled to vote in accordance with a direction on the Proxy Form to vote as the proxy decides.

Proxies

A Shareholder entitled to attend and vote has a right to appoint a proxy. The proxy does not need to be a member of St Barbara. A Shareholder that is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If no proportion or number is specified, each proxy may exercise half of the Shareholder's votes.

A Proxy Form accompanies this Notice of Annual General Meeting and to be effective must be received at St Barbara's share registry:

St Barbara Mines Limited Share Registry C/- Advanced Share Registry Services 7th Floor 200 Adelaide Terrace Perth, Western Australia, 6000 OR by facsimile: +61 (08) 9221 7869

by no later than 3.00pm (Perth time) on 27 November 2004.

By Order of the Board

Datech 28 October 2004

Lee Boyd Company Secretary

1 Purpose of this Document

This Explanatory Memorandum has been prepared to provide all the information known to St Barbara that is material to the decision of Shareholders on how to vote on Resolutions 1 to 10 inclusive as set out in the Notice of Annual General Meeting.

This Explanatory Memorandum is only one part of the Meeting Documentation and Shareholders should read the entire Meeting Documentation including the Independent Experts Report before making a decision on how to vote on the resolutions.

This Explanatory Memorandum is dated 28 October 2004.

2 Overview of the Proposal

On 20 September 2004, St Barbara announced the Proposal under which, subject to any necessary Sharcholder approvals, St Barbara would divest a substantial part of its holding of NuStar Shares and all of its interest in the Paulsens Project, the main asset of NuStan

Soon after the appointment of the new Chairman and Managing Director/CEO by Shareholders at the Company's general meeting held on 20 July 2004, the reconstituted Board commenced a detailed review of the finances and assets of the Company. The primary outcomes of that review were:

(a) the Company required an immediate injection of funds to discharge existing indebtedness and provide working capital;
(b) the Company's exploration tenements at Meekatharra were highly prospective with reasonable opportunities for exploration success;
(c) the Paulsens Project was attracting some interest from the investment markets and financiers willing to consider financing development of the project creating the possibility for the Company to consider disposal of some or all of its interest in NuStar and the Paulsens Project; and
(d) there were a small number of substantial Shareholders that had voted against the current management at the recent Shareholder meeting on 20 July 2004 which had expressed a greater interest in NuStar than in remaining as Shareholders in St Barbara.

Subsequent to the completion of the review, the Board considered a number of alternatives to move the Company forward including different fundraising possibilities, a tender sale of the Paulsens Royalty, refinancing existing debt and further increasing its stake in NuStar. After careful consideration of all of these and other alternatives, the Board chose to proceed with the Proposal because it believes that it provides the best opportunity to restore value to the Company.

The Proposal is structured into 4 key components which are discussed in more detail in the sections that follow.

2.1 Initial sale of NuStar Shares

The first component of the Proposal involved the sale to third parties of 100 million NuStar Shares held by the Company at a price of 4 cents per share. Claymore Capital completed the sale of these NuStar Shares on 30 September 2004.

The proceeds from the sale of \$4 million have been substantially applied in repaying the Company's secured debt. The Company's assets are now unsecured after repayment of that debt and release of the associated security.

2.2 Divestment of interest in Paulsens Project

On 30 September 2004, St Barbara and NuStar entered into agreements under which St Barbara will surrender the Paulsens Royalty and sell its interest in the Pelican Joint Venture to NuStar.

The Paulsens Royalty entitles the holder to 5% of the proceeds from gold sales in excess of 6,000 ounces from the Paulsens Mining Lease. St Barbara has agreed, subject to the approval of Shareholders, to surrender the Paulsens Royalty in exchange for the payment by NuStar of \$5.1 million.

The Pelican Joint Venture is a joint venture between St Barbara and Pelican Resources Limited in respect of mining tenements E08/853 and E08/854 which are in close proximity to the Paulsens Mining Lease. The initial consideration for the sale of St Barbara's interest in the Pelican Joint Venture is \$50,000 with a subsequent payment of \$400,000 dependent on the establishment of a mining reserve.

The surrender of the Paulsens Royalty is subject to the approval of NuStar and St Barbara shareholders (for further details see section 8 below).

2.3 Grant of option to Claymore Capital

On 20 September 2004, St Barbara entered into a call option with Claymore Capital under which St Barbara agreed to grant an option to Claymore Capital or its nominee to purchase 100 million NuStar Shares at an exercise price of 5 cents per share. The call option expires on 16 May 2005.

2.4 Buy-back Offer

The Buy-back Offer gives Shareholders the opportunity to exchange their St Barbara Shares for NuStar Shares on the basis of 1.25 NuStar Shares for each St Barbara Share. Under the terms of the Buy-back Offer, St Barbara will buy-back up to 192 million St Barbara Shares. If acceptances under the Buy-back Offer exceed this amount, all Shareholders who elect to sell their St Barbara Shares will be scaled back on a pro rata basis.

The proposed Buy-back is subject to the approval of St Barbara shareholders (for further details see section 9 below).

3 Advantages and disadvantages of the Proposal

3.1 Benefits of the Proposal

The following is a summary of the benefits expected from the Proposal:

Financial henefits

Retirement of debt: as a result of the initial safe of the NuStar Shares and the divestment of St Barbara's interest in the Paulsens Project, the Company is able to retire its existing secured debt of \$3.5 million (leaving the Company unencumbered), pay unsecured creditors and clear other short term liabilities and retain some cash as working capital.
Cash for exploration: the initial sale of the NuStar Shares and surrender of the Paulsens Royalty will also provide working capital to allow for the immediate resumption of active exploration of the Company's 100% owned Meckatharra exploration ground which the new management team considers is highly prospective.
Future possibilities: having a debt free balance sheet leaves the Company in a good position to consider future funding possibilities in the event that suitable exploration and acquisition opportunities arise.

Focus on controlled businesses

The reduction in the Company's investment in NuStar and the Paulsens Project will allow the Company to now focus its resources and exploration efforts on the projects it can directly control such as the highly prospective Paddy's Flat tenements in the Meckatharra region as well as its management of the Aurogenic and Elara joint ventures.

St Barbara issued capital

Opportunity for direct investment in NuStar: the Buy-back Offer under the Proposal is structured to give Shareholders an equal opportunity to acquire a direct interest in NuStar Shares.
Shareholders do not have to accept Buy-back Offer: Shareholders who accept into the Buy-back Offer will reduce their exposure to St Barbara. As discussed in section 9.1 below, Shareholders can vote in favour of Resolution 8 (Approval of Buy-back Offer) at the Annual General Meeting but do not have to accept the Buy-back Offer, which will be made under a separate document to be sent to Shareholders soon after the Annual General Meeting.
Reduction of issued capital: the Buy-back will result in a reduction in the total number of St Barbara Shares on issue and an increase in the Company's net cash asset backing per share. The Board believes that the investment community is more favourably disposed to Companies with smaller number of shares on issue.

1989 - Andrea Stadt Britannia (h. 1989)

Explanatory Memorandum

Exit of non-aligned Shareholders: the Company's largest shareholder, RCF, has indicated its intention to remain a Sharcholder. Ocean, Strata and Toto (who in total own approximately 21.5% of the Company) have indicated their desire to swap their St Barbara shareholdings for a direct shareholding in NuStar. If the level of acceptances from other Shareholders is sufficiently low such that each of those retiring Shareholders is able to exit the share register of St Barbara it will remove three Shareholders who in total own approximately 21.5% of the Company and who have indicated their preference for NuStar and the Paulsens Project. The Board therefore believes the opportunity for Shareholders to choose between a shareholding in St Barbara and a shareholding in NuStar will be beneficial to the Company.

Future potential

Secure financial future: the Proposal represents an important step towards the Company securing its financial future and generating working capital for exploration.
Review of Paddy's Flat tenements: in particular, the Proposal will allow the Company to complete a comprehensive review and data compilation of the Paddy's Flat tenements (100% owned) in the Meckatharra region with a view to exploration drilling commencing at an early stage.
Future opportunities: the Proposal allows the Company to plan for the future without having to worry about the past in the form of unpaid creditors and potentially hostile Shareholders.

Further details of the anticipated benefits are contained below. While the Directors reasonably expect these benefits to be achieved, there can be no guarantee that they will be achieved to the degree expected or at all.

3.2 Arguments against the Proposal

The Directors are of the view that the benefits outweigh the burdens of the Proposal. However, Shareholders need to be aware of the burdens or potential disadvantages that the Directors can identify. These are discussed below.

Loss of control of NuStar

By virtue of its current 44.72% shareholding in NuStar (calculated after the first sale of 100 million NuStar Shares), St Barbara has the capacity to determine the outcome of decisions about NuStar's financial and operating policies. By selling down its stake in NuStar through the offer and sale of up to 240 million NuStar Shares, St Barbara's shareholding will reduce to approximately 20.5% (and subsequently upon exercise of the option, to approximately 10%) thereby reducing or effectively removing its ability to control NuStar. St Barbara, however, has never previously sought to exert, or has exerted, control over NuStar and the Directors do not believe this loss of control to be a disadvantage, in practice, to the Company.

Reduced exposure to NuStar

The divestment of the NuStar shareholding will result in a reduction in the Company's exposure to any potential future dividends and capital growth of NuStan

3.3 Other factors

Increased shareholding of RCF

As set out in sections 7 and 9.4 below, the shareholding of St Barbara's largest shareholder, RCF, is likely to increase under the proposed Buy-back.

4 Independent Expert's opinion and Directors' recommendation

4.1 Independent Expert's opinion

The Independent Expert's Report, prepared by Deloitte Corporate Finance, is included with this Explanatory Memorandum. That report concludes that the surrender of the Paulsens Royalty to NuStar for \$5.1 million is fair and reasonable to St Barbara's shareholders.

Directors recommend that Shareholders read the Independent Expert's Report in full before voting on the resolutions.

4.2 Director's recommendation

Each Director has approved the disclosure in this Explanatory Memorandum and desires to make, and considers himself justified in making, a recommendation to Shareholders.

The Directors unanimously recommend that Shareholders approve each resolution contained in the Notice of Annual General Meeting except for:

Henderson Tuten who declines to make a recommendation in relation to Resolution 1 as he has an interest in its outcome:
Mark Wheatley who declines to make a recommendation in relation to Resolution 2 as he has an interest in its outcome; and
Eduard Eshuys who declines to make a recommendation in relation to Resolutions 9 and 10 as he has an interest in their outcome.

The Directors' recommendation that you vote in favour of all resolutions is based on the reasons set out in this Explanatory Memorandum and the Independent Expert's conclusion.

5 Resolutions 1 and 2 - Re-election of Directors

5.1 Henderson G Tuten

Mr Henderson (Hank) G Tuten, B.A. (Econ), aged 56, was appointed as a non-executive Director on 26 March 2002.

Mr Tuten is actively involved in a consolidated entity of private equity funds as a founding partner. These are the Resource Capital Funds, the e-Century Capital Fund and the CIP Fund. He spent over 15 years with the N.M. Rothschild and Sons consolidated entity. During that period, he was the chief executive officer of Rothschild Australia Limited, Rothschild North America Inc. and Continuation Investments N.V., the private equity vehicle for Rothschild Continuation Holdings A.G. consolidated entity. Prior to that, he was a commercial banker with the Philadelphia National Bank. Mr Tuten serves on several boards in connection with his investment activities. He graduated from the University of Virginia with a B.A. in Economics.

5.2 Mark K Wheatley

Mr Mark K Wheatley, B.E.(Chern) Hons 1, MBA, aged 43, was appointed as a non-executive Director on 28 November 2003.

Mr Wheatley has 25 years resource industry experience within Australia and overseas. In his 17 years with BHP until 1996, he was involved in engineering, research, business development and commercial roles within the steel, minerals and corporate business groups. He then joined BT and became a Senior Vice President within the Global Metals and Mining Group where he was involved in project finance and corporate advisory activities over the next 3 years. He moved to the gold industry in 1999 where, as General Manager Corporate Development with Goldfields/Aurion Gold Limited and a period as Acting Managing Director of Goldfields, he completed a number of mergers and acquisitions that underpinned the company's ten fold increase in market capitalisation before it was taken over by Placer Dome Inc. in 2002. Mr Wheatley is currently Executive Chairman of Southern Cross Resources Inc., a company which is listed on the Toronto Stock Exchange.

6 Resolutions 3 to 5 – Ratification of share issues

Under ASX Listing Rule 7.1, the prior approval of Shareholders was not required to issue the St Barbara Shares detailed in sections 6.1 to 6.3 because those securities, when aggregated with securities issued by St Barbara during the previous 12 months (other than securities issued with shareholder approval), did not exceed 15% of the number of securities on issue at the commencement of that 12 month period.

However, ratification is now sought for the issue of these St Barbara Shares to enable the Directors to consider additional funding initiatives over the next 12 months consistent with the provisions of Listing Rule 7.1 and the Corporations Act.

The Directors recommend the ratification of the issue of the St Barbara Shares and recommend that Shareholders vote in favour of Resolutions 3 to 5.

6.1 Resolution 3 - Issue of St Barbara Shares to RCF

On 21 July 2004, St Barbara issued 26,591,453 St Barbara Shares to RCF at an issue price of \$0.046 per share to raise \$1,223,207 to be used for the general purposes of the Company's business.

The St Barbara Shares issued to RCF were fully paid ordinary shares in the capital of St Barbara and rank equally with all other ordinary shares.

In accordance with Listing Rule 7.5.6, the Company will disregard any votes cast by RCF or any of RCF's associates in respect of Resolution 3. However, the Company will not disregard a vote if it is cast by a person who is entitled to vote, in accordance with the directions on the proxy form or it is east by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

6.2 Resolution 4 - Issue of St Barbara Shares to Ocean

On 19 July 2004, St Barbara issued 17,480,547 St Barbara Shares to Ocean at an issue price of \$0.046 per share to raise \$804,105 to satisfy accrued and due interest on the Ocean convertible note.

The St Barbara Shares issued to Ocean were fully paid ordinary shares in the capital of St Barbara and rank equally with all other ordinary shares.

In accordance with Listing Rule 7.5.6, the Company will disregard any votes cast by Ocean or any of Ocean's Associates in respect of Resolution 4. However, the Company will not disregard a vote if it is cast by a person who is entitled to vote, in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

6.3 Resolution 5 - Issue of St Barbara Shares to other parties

On 19 July 2004, St Barbara issued 42,050,000 St Barbara Shares to the persons listed below at an issue price of \$0.04 per share to raise \$1,682,000 to be used for the general purposes of the Company's business.

	42.050.000
Spartan Nominees Pty Ltd	25,300,000
Clients of Gillon Securities Ltd	16,750,000
Example 18 Same of person	1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.

The St Barbara Shares issued to these persons were fully paid ordinary shares in the capital of St Barbara and rank equally with all other ordinary shares.

In accordance with Listing Rule 7.5.6, the Company will disregard any votes cast by these persons or any of their Associates in respect of Resolution 5. However, the Company will not disregard a vote if it is cast by a person who is entitled to vote, in accordance with the directions on the Proxy Form or it is east by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

7 Resolution $6$ – Approval of share issue

The purpose of Resolution 6 is to authorise the issue of new St Barbara Shares to RCE

______________________________________

The Directors recommend the approval of the issue of the St Barbara Shares to RCF and recommend that Shareholders vote in favour of Resolution 6.

On 6 August 2004, St Barbara entered into an agreement with RCF whereby RCF lent \$1.2 million to St Barbara to be used for working capital purposes (Loan Agreement). The major terms of the Loan Agreement provide that:

Repayment: St Barbara must, subject to Shareholder approval and the Conversion Limit, repay the loan amount by the conversion of the Ioan amount into St Barbara Shares on the Conversion Date at the Conversion Price;
Conversion Limit: the loan amount must only be converted to the extent that RCF does not hold in excess of 25.6% of St Barbara's Shares on the Conversion Date (Conversion Limit). Any portion of the loan amount not converted after the Conversion Date must be converted into St Barbara Shares immediately upon written notice from RCF that such conversion complies with the Corporations Act. If the loan amount is not fully converted by no later than the date that occurs 12 months after the Conversion Date, St Barbara must immediately repay the outstanding loan amount in eash;
Conversion Date: The date at which the loan is to be converted into St Barbara Shares (Conversion Date) is the earlier of the completion of any cumulative new equity placements of greater than \$3 million and 1 December 2004; and
Conversion Price: the loan amount will convert into St Barbara Shares at the lowest price at which St Barbara has carried out a placement of St Barbara Shares, or converted other amounts owing to it, between 1 August 2004 and the Conversion Date (Conversion Price) provided that if no such equity is issued, the Ioan amount will be converted into St Barbara Shares at 80% of the average market price for St Barbara Shares over the last 5 days on which sales in St Barbara Shares were recorded immediately before the Conversion Date.

St Barbara has not made, and has no current intentions of making, an equity placement during the period 1 August 2004 to 30 November 2004. Therefore the Conversion Date will be 1 December 2004. Further, as there will be no placement. or other conversion during this period, the Conversion Price will be 80% of the average market price for St Barbara Shares over the last 5 days on which sales in St Barbara Shares were recorded immediately before the Conversion Date.

Accordingly, the actual number of St Barbara Shares that will be issued to RCF under the Loan Agreement cannot be determined at this stage. However, based on St Barbara's closing share price as at 18 October 2004 of \$0.05, St Barbara would be required to issue 30 million new St Barbara Shares to RCF under the terms of the Loan Agreement. The issue of these shares would, theoretically, increase RCF's voting power in St Barbara from 21.86% to 26.05%, which is in excess of the Conversion Limit. Accordingly, RCF may not be able to fully convert the loan amount at the Conversion Date but may, subject to complying with the requirements of the Corporations Act, be able to convert any unconverted portion of the loan amount at some future date.

In addition, RCF's voting power in St Barbara may further increase depending on acceptances to the Buy-back Offer. Shareholders should refer to section 9.4 which discusses the effect of the Buy-back Offer on control of St Barbara in more detail.

Any new St Barbara Shares issued to RCF pursuant to the Loan Agreement will rank equally with all other ordinary shares.

In accordance with Listing Rule 7.3.8, the Company will disregard any votes cast by RCF or any of its Associates in respect of Resolution 6. However, the Company will not disregard a vote if it is cast by a person who is entitled to vote, in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

1989 - Andrea Stadt Britannia (h. 1989).

8 Resolution 7 - Approval of surrender of Paulsens Royalty

Explanatory Memorandum

8.1 Surrender of Paulsens Royalty

The purpose of Resolution 7 is to approve the surrender by St Barbara of the Paulsens Royalty to NuStar.

The Paulsens Royalty entitles the holder to 5% of the proceeds from gold sales in excess of 6,000 ounces from the Paulsens Mining Lease. St Barbara proposes to surrender the Paulsens Royalty in exchange for the payment by NuStar to St Barbara of \$5.1 million.

The surrender of the Paulsens Royalty is subject to the approval of Shareholders.

8.2 Basis for approval

Listing Rule 10.1 requires that an entity must not dispose of a substantial asset to a subsidiary without the approval of the holders of ordinary shares.

St Barbara currently holds 44.72% of the issued NuStar Shares and accordingly NuStar is subsidiary of St Barbara.

Broadly, an asset is a substantial asset if its value, or the value of the consideration for it, is 5% or more of the equity interests of the company. On the basis that St Barbara will receive \$5.1 million for the surrender of the Paulsens Royalty and the equity interest of the Company as set out in the Company's latest financial account is \$26.008 million, the Paulsens Royalty represents a substantial asset of the Company.

8.3 Information relevant to the surrender of the Paulsens Royalty

Benefits of the surrender of the Paulsens Royalty

The Directors consider that the surrender of the Paulsens Royalty is in the best interests of the Company and recommend that Shareholders vote in favour of Resolution 7 for the following reasons:

the proposed surrender enhances the Company's cash position without dilution of existing Shareholders' interests: and
$\ddot{\phantom{0}}$ the proposed surrender enables the Company to readily fund and focus its resources and exploration efforts on the Meckatharra region, particularly the 100% owned Paddy's Flat tenements.

Independent Expert's Report

In accordance with Listing Rule 10.10, the Company has commissioned an Independent Expert's Report to assess whether \$5.1 million is a fair and reasonable price for the surrender of the Paulsens Royalty. The report is contained in this Meeting Documentation.

The Independent Expert considered all of the circumstances surrounding the proposed surrender of the Paulsens Royalty, including the advantages and disadvantages thereof to Sharcholders, and determined the fair market value of the Paulsens Royalty to be in the range of \$4.2 million to \$5.4 million.

The Independent Expert has concluded that the surrender of the Paulsens Royalty to NuStar for \$5.1 million is fair and reasonable to St Barbara's shareholders.

9 Resolution 8 - Approval of Buy-back Offer

9.1 The Buy-back Offer

Under a buy-back, a company buys back its own shares from its shareholders. Any shares bought back are then cancelled, with the result that the total number of the company's shares on issue is reduced by that number of shares bought back.

The purpose of Resolution 8 is to allow the Company to proceed with the offer to buy-back up to 192 million St Barbara Shares in consideration for St Barbara transferring up to 240 million NuStar Shares to those Shareholders who accept under the Buy-back Offer.

St Barbara intends to offer 1.25 NuStar Shares for each St Barbara Share. The Buy-back Offer is effectively an equal access scheme within the meaning of the Corporations Act (however, see section 9.5 below for further information in this regard). Accordingly, the Buy-back Offer is to be made to all Shareholders to buy-back up to 100% of their St Barbara Shares.

If the number of acceptances exceeds 192 million St Barbara Shares, St Barbara would scale back the number of St Barbara Shares to be bought back from Shareholders on a pro-rata basis (subject to certain exceptions - see section 9.5 below).

If Resolution 8 is passed, a separate Buy-back Offer document and acceptance form will be sent to all Shareholders immediately following the Annual General Meeting which will contain further details on how to accept the Buy-back Offer. As St Barbara will be offering NuStar Shares in consideration for the St Barbara Shares and because St Barbara has the ability to control NuStar, the Corporations Act requires that the Buy-Back Offer document must be in the form of a prospectus.

You can therefore vote in favour of Resolution 8 (Approval of Buy-back Offer) at the Annual General Meeting but you do not have to accept the Buy-back Offer.

The Annual General Meeting is only for the purposes of enabling Shareholders to decide whether to authorise St Barbara to conduct the Buy-back Offer. Each Shareholder will have a further opportunity to decide whether to participate in the Buy-back Offer following receipt of the Buy-back Offer document.

9.2 Basis for approval

In accordance with Part 2J.1 of the Corporations Act, before any buy-back agreement is entered into, the terms of the buy-back agreement must be approved by a resolution passed at a general meeting of the company.

St Barbara must include with the notice of meeting a statement setting out all information known to St Barbara that is material to the decision how to vote on the resolution. However, St Barbara does not have to disclose the information if it would be unreasonable to require St Barbara to do so because St Barbara has previously disclosed the information to its Shareholders.

The information set out below is provided for Shareholders to consider in relation to the Buy-back Offer.

. . . . . . . . . . . . . . . . . . . .

9.3 Information relevant to the Buy-back Offer

Set out below is information relevant to the Buy-back Offer and the resultant reduction in capital.

Number of St Barbara Shares on Issue

St Barbara currently has 715,271,157 fully paid ordinary shares on issue. St Barbara does not have any other classes of shares on issue.

Number and percentage of St Barbara Shares to be bought back

St Barbara proposes to buy-back up to 192 million St Barbara Shares. This represents up to approximately 26.8% of the St Barbara Shares currently on issue.

Particulars of the terms of the Buy-back Offer

The material terms of the Buy-back Offer are summarised in the section 9.1 above. You should also read the Buy-back Offer document carefully when it is sent to you.

Buy-back Offer price

The intended consideration to be offered by St Barbara under the Buy-back Offer is 1.25 NuStar Shares for each St Barbara Share, up to a maximum of 240 million NuStar Shares. Any fractional entitlement will be rounded down to the nearest whole number of NuStar Shares.

Based on the volume weighted average price of NuStar Shares over the 5 trading days prior to the date of announcement of the Proposal on 20 September 2004, the intended Briy-back ratio described above means that the value attributed to each St Barbara Share is approximately 4.8 cents, to be paid by way of the transfer from St Barbara to accepting Shareholders of the relevant NuStar Shares.

Current St Barbara Share price

The last price for St Barbara Shares quoted on ASX on 18 October 2004 was 5 cents. During the past 12 months the maximum and the minimum closing prices for St Barbara Shares quoted on ASX was 10.5 and 4 cents, respectively.

Reasons for the Buy-back

The Buy-back is proposed as a means by which the Company can divest a substantial part of its shareholding in NuStar and at the same time allow Shareholders wishing to hold NuStar Shares to exchange their St Barbara Shares for NuStar Shares directly without incurring brokerage costs.

Directors' participation or interest in the Buy-back Offer

As all St Barbara shareholders are permitted to participate in the Buy-back equally, those Directors (if any) holding St Barbara Shares may participate in the Buy-back on an identical basis to other Sharcholders.

Particulars of Directors' interests in St Barbara Shares as at the date of this Explanatory Memorandum are as follows:

Director	Direct interest No. of Shares	Indirect interest No. of Shares
S J C Wise ¹	Nil	700.000
E Eshuys	Nii	Nil
$H G$ Tuten ²	Nil	156,333,470
M K Wheatley	Nil	Nil
Total	Nii	Nii

Note:

Mr Wise's superannuation fund is the holder of 700,000 Shares.
Mr Tuten is the Chairman of RCF Management LLC, the management company of Resource Capital Fund II, LP. Resource Capital Fund II, LP, which currently holds 156,333,470 (21.86%) of St Barbara Shares, has informed the Company that it does not intend to accept the Buy-back Offer in respect of those St Barbara Shares.

Financial effect of the Buy-back Offer on St Barbara

As the St Barbara Shares to be bought back by St Barbara will be cancelled, the effect will be to reduce St Barbara's issued share capital by up to 192 million ordinary shares.

In addition, the value of St Barbara assets will be reduced by up to \$9.6 million, being the carrying value of the 240 million NuStar Shares used to buy-back the St Barbara Shares.

______________________________________

St Barbara no longer consolidates its holding in NuStar as a consequence of the sale of 100 million shares which took place on 30 September 2004.

The Directors are of the view that the Buy-back does not materially prejudice the Company's ability to pay its creditors as consideration for the Buy-back is not cash.

No funds required for the Buy-back Offer

The consideration for the Buy-back is not cash. St Barbara will exchange the St Barbara Shares bought back for NuStar Shares that it already owns. Accordingly, St Barbara does not need to raise any funds for the Buy-back.

The latest set of audited financial statements

St Barbara's latest set of audited financial statements for the year ended 30 June 2004 were lodged with ASX on 30 September 2004.

Copies of these financial statements are available upon request and without charge to any person entitled to vote at the Annual general meeting. They are also available for Shareholders to download at St Barbara's website www.stbarbara.com.au and/or on the ASX website www.asx.com.au.

Advantages and disadvantages of approving the Buy-back Offer

The Directors believe that there are no material disadvantages for St Barbara in approving the Buy-back.

As noted above in section 3.1, if approved by Shareholders, the Directors consider that the benefits of the Buy-back are as follows:

Direct investment in NuStar: the Buy-Back provides St Barbara Shareholders with a direct means to exchange St Barbara Shares for NuStar Shares.
Equal access: the Buy-back Offer will be open to all Shareholders (subject to a certain exception see section 9.5 below) on an equal basis and participation by Shareholders will be entirely voluntary.
Reduction of issued capital: the Buy-back will also result in a reduction in the total number of St Barbara Shares on issue.
Attitude of significant Shareholders: depending on the level of acceptances under the Buy-Back Offer, three potentially hostile Shareholders will be able to retire from the Share register of St Barbara.

9.4 The effect of the Buy-back Offer on control of St Barbara

The Company has been advised by:

its largest shareholder, RCF, that it will NOT accept the Buy-back Offer in relation to any of its holding of 156,333,471 St Barbara Shares (comprising 21.86% of the Company's total issued capital); and
three of its largest Shareholders, Ocean, Toto and Strata, that they will vote in favour of Resolution 8 and, if the resolution is approved, accept the Buy-back Offer in relation to their entire combined holding of 153,680,547 St Barbara Shares (comprising a combined 21.5% of the Company's total issued capital).

As a result of the scale back mechanism, in the event of over acceptances under the Buy-back, the final shareholding levels of RCF, Ocean, Toto and Strata will depend on the level of participation of other Shareholders in the Buy-back. This will not be known until after the close of the Buy-back Offer period.

Explanatory Memorandum

For illustration purposes, the following table sets out the possible effect of the Buy-back on RCF and other substantial holders assuming $100\%$ , $50\%$ , $25\%$ and $0\%$ of participation by other Shareholders.

	Current	Level of Participation by Other Shareholders
	Holding	0%	25%	50%	100%
RCF	156,333,470	156.333.470	156,333,470	156,333.470	156,333,470
	$(21.9\%)$	$(27.8\%)$	$(29.9\%)$	$(29.9\%)$	$(29.9\%)$
Ocean, Toto	153,680,547	0	37,965,790	70,868,563	100,889,931
and Strata ²	$(21.5\%)$	$(0.0\%)$	$(7.3\%)$	$(13.5\%)$	$(19.3\%)$
Other	405,257,140	405.257,140	328,971,896	296,069.123	266,047,755
shareholders	$(56.7\%)$	$(72.2\%)$	$(62.9\%)$	$(56.6\%)$	$(50.8\%)$

Note:

1: These calculations do not include the issue of St Barbara Shares under the Loan Agreement as described in section 7.
2: Ocean, Toto and Strata's current holding of St Barbara Shares are 107,480,547, 14,000,000 and 32,200,000 respectively.

RCF has advised the Company that, if its holding of St Barbara Shares increases pursuant to the Buy-back Offer, it has no current intentions to change its policies in regards to its shareholding. RCF has indicated to the Company that it has made the appropriate disclosure to the Foreign Investment Review Board in relation to its potential increased voting percentage in St Barbara if the Buy-back proceeds.

9.5 Treatment of Overseas Shareholders and Scale Back

St Barbara has applied to ASIC for an exemption in accordance with ASIC's powers under section 257D(4) of the Corporations Act. If granted, the exemption will allow St Barbara to:

(a) appoint a nominee and have that nominee sell the NuStar Shares that would have been received by certain overseas Shareholders and distribute the sale proceeds (net of expenses) to those shareholders; and
(b) scale back over acceptances other than on a strictly pro rata basis where this will avoid Shareholders being left with an unmarketable parcel of St Barbara Shares.

The overseas Shareholders referred to in (a) above are those Shareholders who accepts the Buy-back Offer and:

who has a registered address outside Australia or New Zealand; or
who has a registered address in the United Kingdom and has not established to St Barbara that the Buy-back Offer may be issued to them without the need for St Barbara to comply with the legal obligations in that jurisdiction.

The exemption is required to avoid the cost and time involved in having to comply with different regulatory regimes when offering shares into foreign jurisdictions.

9.6 Tax consequences

Set out below is a guide to general tax implications of the Buy-back. The guide is expressed in general terms and does not take account of the particular circumstances of any Shareholder. You should seek professional advice as to the tax implications of the Buy-back and the Proposal generally.

Effect on St Barbara

St Barbara's average cost base for its NuStar Shares is \$0.05. In view of the substantial tax losses currently available to St Barbara, any tax effect is not expected to be material.

Effect on individual Shareholders

Australian tax implications for Australian resident taxpayers

The following discussion is intended only as a general summary of the Australian income tax implications of selling St Barbara Shares in the Buy-back and further information will be provided in the Buy-back Offer.

Where no part of the Buy-back Consideration is a dividend

The tax implications set out below assume that no part of the consideration under the Buy-back (Buy-back Consideration) will be treated as a dividend for income tax purposes as the entire Buy-back Consideration will be debited against the share capital account.

Although the Commissioner of Taxation ("the Commissioner") has the power to potentially make a determination that some part of the Buy-back Consideration is treated as a dividend for income tax purposes, in view of the Company having no retained earnings, the Directors consider this to be highly unlikely.

Accepting Shareholders will be taken to have received consideration in respect of each share bought back (Buy-back Consideration). The amount of the consideration can not yet be determined as it will be related to market prices at, or immediately prior to, the Buy back. Further information will be provided in the detailed Buy-back Offer documents.

As a historical indication, the Independent Expert's Report attached shows that St Barbara Shares have traded in the range of $4.2$ cents to $5.9$ cents over the past three months.

In general, the relevant treatment is as follows:

St Barbara Shares held on capital account

To the extent that the Buy-back Consideration exceeds the Shareholder's cost base of the St Barbara Shares bought back, they may derive a capital gain.

Shareholders who have owned their St Barbara Shares for longer than 12 months may be entitled to the capital gains tax ("CGT") discount, amounting to $50\%$ of the capital gain derived by Sharcholders who are individuals or trustees and 33% of the capital gain derived by superannuation funds.

If the cost base of the St Barbara Shares bought back exceeds the Buy-back Consideration per share, the difference will be a capital loss.

A non-resident Shareholder who participates in the Buy-back should not make an Australian capital gain or loss in relation to their St Barbara Shares bought back, provided that the non-resident Shareholder and its associates beneficially owned less than 10% by value of the issued shares of St Barbara at any time during the 5 years before sale of the relevant St Barbara Shares under the Buy-back.

Explanatory Memorandum

St Barbara Shares held on revenue occount

The excess of the Buy-back Consideration over the cost of each St Barbara Share bought back will be included in the Shareholder's assessable income.

Conversely, if the cost exceeds the Buy-back Consideration for each St Barbara Share bought back, the difference will be an allowable deduction.

Non-resident Shareholders resident in countries with which Australia has a Double Tax Agreement ("DTA") may benefit from treaty protection in ensuring that no tax liability arises in Australia. Generally this could provide exemption from Australian tax unless the profits are attributable to a permanent establishment held by the non-resident Shareholder in Australia.

All non-resident Shareholders are strongly advised to seek independent taxation advice specific to their circumstances.

Cost base of NuStar Shares

NuStar Shares acquired by way of Buy-back Consideration will have a cost base per NuStar Share equal to the Buy-back Consideration per St Barbara Share divided by 1.25.

Stamp Duty and GST

No Australian State or Territory would impose stamp duty on the sale of the St Barbara Shares or the receipt of NuStar Shares under the Buy-back as the shares would be listed on the ASX at the relevant time.

No Australia Goods and Services tax is payable on the sale of St Barbara Shares or the acquisition of NuStar Shares under the Buy-back, or on the distribution in specie.

10 Resolution 9 and 10 - Approval of issue of initial and further options to Eduard Eshuys

.......................................

As part of his renuneration package, the Company has agreed to issue Mr Eduard Eshuys 35,000,000 options to acquire ordinary shares in the capital of the Company, the material terms of which are:

Tranche	Number	Vesting Date	Conditions of Vesting	Term	Exercise Price
Ŧ	5,000,000	Execution of the employment agreement	None	5 years	Weighted Average price of the Company's ordinary shares on ASX for the 4 week period commencing on 20 July 2004 being \$0.0472
$\overline{2}$	5,000,000	21 July 2005	The Executive being Managing Director and Chief Executive Officer of the Company at 21 July 2005	5 years	As for Tranche 1
3	5,000,000	21 July 2006	The Executive being Managing Director and Chief Executive Officer of the Company at 21 July 2006	5 years	As for Tranche 1
4	5,000,000	14 September 2005	The Executive being Managing Director and Chief Executive Officer of the Company at 14 September 2005	4 years	\$0.15 per St Barbara Share
5	5,000,000	14 September 2006	The Executive being Managing Director and Chief Executive Officer of the Company at 14 September 2006	5 years	\$0.15 per St Barbara Share
6	5,000,000	14 September 2007	The Executive being Managing Director and Chief Executive Officer of the Company at 14 September 2007	6 years	\$0.15 per St Barbara Share
7	5,000,000	14 September 2008	The Executive being Managing Director and Chief Executive Officer of the Company at 14 September 2008	7 years	\$0.15 per St Barbara Share

The options will not be listed and will not be transferable. The options will otherwise be issued to Mr Eshuys outside of the Company's employee share option plan but on the same terms and conditions as are contained in the employee share option plan. A copy of the Company's employee share option plan is annexed at Annexure A to this Notice of Annual General Meeting.

The options will be issued to Mr Eshuys by no later than one month after the date of the Annual General Meeting.

Resolution 9 relates to the approval of the options in Tranches 1 to 3 inclusive. Resolution 10 relates to the approval in the options in Tranches 4 to 7.

The Board believes that it is appropriate to issue the options to Mr Eshuys to attract a person of his quality and experience to the Company. Mr Eshuys is a very experienced geologist with 35 years of extensive mineral industry experience. He holds a Bachelor of Science degree and is a highly regarded executive and company officer previously occupying chief executive, senior management and non-executive director positions in exploration companies of varying size and scale. In 1996, Mr Eshuys was awarded the Geological Society of Australia's Joe Harmes medal for distinction in exploration success and project development. During Mr Eshuys' extensive career he led exploration teams to the discovery of the Plutonic, Bronzewing, Jundee, Quarters and Rosemount gold deposits.

Accordingly, to both attract a Managing Director of Mr Eshuys' experience and to provide an incentive for him to seek to improve company value for shareholders, the Board agreed to issue Mr Eshuys with the tranches of options particularised in Tranches 1 to 3. Resolution 9 is therefore recommended, with unanimous support from Directors (with the exception of Mr Eshuys who declines to make a recommendation as he has an interest in the outcome of the resolution).

The Board believes the Company will best benefit from Mr Eshuys' extensive technical expertise, management skills and experience if he is enabled to achieve personal capital growth concurrently with the Company's growth. In current market conditions, company growth in the exploration and gold and metals sectors is typically achieved as a consequence of the successful implementation of a well structured and managed exploration strategy.

The Board believes that Mr Eshuys is ideally positioned to facilitate such an objective and have agreed to issue a further package of options at the much higher exercise price of 15 cents (being approximately three times the current share price) particularised in Tranches 4 to 7 to provide additional incentive for Mr Eshuys to achieve a company transforming improvement in the St Barbara Share price. The Board therefore unanimously recommends (with the exception of Mr Eshays who declines to make a recommendation as he has an interest in the outcome of the resolution) that Shareholders approve Resolution 10.

Full details of Mr Eshuys' remuneration are contained in Note 33 to the Annual Accounts.

11 Definitions

Annual General Meeting means the annual general meeting of St Barbara to be held at the Conference Suite, Level 8, Exchange Plaza, 2 The Esplanade, Perth Western Australia on Monday 29 November 2004 at 3.00pm (Perth time) to consider and, if thought fit, pass the resolutions set out in the Notice of Annual General Meeting:

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ASIC means the Australian Securities and Investments Commission:

Associate has the meaning given to that term in sections 10 to 17 of the Corporations Act;

ASX means Australian Stock Exchange Limited;

Board means the board of directors of St Barbara;

Buy-back means the proposed buy-back of St Barbara Shares by St Barbara under the Buy-back Offer;

Buy-back Consideration has the meaning given to it in section 9.6;

Buy-back Offer means the proposed buy-back offer by St Barbara of up to 192,000,000 million St Barbara Shares in consideration for the transfer (by St Barbara) to accepting Shareholders of up to 240 million NuStar Shares:

Claymore Capital means Claymore Capital Pty Ltd;

Conversion Date has the meaning given to it in section 7;

Conversion Limit has the meaning given to it in section 7;

Conversion Price has the meaning given to it in section 7;

Corporations Act means the Corporations Act 2001 $(Chh)$ :

Corporations Regulations means the Corporations Regulations 2001 (Cth);

Deloitte Corporate Finance means Deloitte Corporate Finance Pty Ltd;

Director means a director of St Barbara;

Explanatory Memorandum means the explanatory memorandum accompanying the Notice of Annual General Meeting contained in this Meeting Documentation:

Independent Expert means Deloitte Corporate Finance;

Independent Expert's Report means the report by the Independent Expert and contained in the Meeting Documentation:

Listing Rule means the Official Listing Rules of the Australian Stock Exchange Limited;

Loan Agreement means the loan agreement between St Barbara and RCF dated 6 August 2004 and as referred to in section 7;

Meeting Documentation means this document comprising of the Notice of Annual General Meeting, Explanatory Memorandum, Independent Expert's Report and the Proxy Form;

Notice of Annual General Meeting means the notice dated 28 November 2004 which is enclosed in the Meeting Documentation;

NuStar means NuStar Mining Corporation Limited ABN 11 060 156 452;

NuStar Share means a fully paid ordinary share in the capital of NuStar;

Ocean means Ocean Resource Capital Holdings Plc;

Paulsens Mining Lease means mining lease M08/99:

Paulsens Project means the gold deposit on the Paulsens Mining Lease;

Paulsens Royalty has the meaning given to it in section 2.3;

Pelican Joint Venture has the meaning given to it in section 2.3;

Proposal means the proposed divestment of a substantial part of the Company's shareholding in NuStar and the Company's interest in the Paulsens project and adjacent tenements comprising of 4 separate but interrelated transactions as described in the Explanatory Memorandum;

Proxy Form means the proxy form for the Annual General Meeting contained in this Meeting Documentation;

RCF means Resource Capital Fund II, LP;

Shareholder means a holder of St Barbara Shares;

St Barbara or the Company means St Barbara Mines Limited ACN 36 009 165 066;

St Barbara Share means a fully paid ordinary share in the capital of St Barbara;

Strata means Strata Mining Corporation Ltd; and

Toto means Toto Capital Inc.

1989 - Andrea Stadt Gallery, amerikan basar basal dan basa dalam basal dan basal dan basal dalam basal dalam

Annexure A

Rules of the St Barbara Mines Limited Employee Option Plan 2001

$\mathbf{I}$ . DEFINITIONS AND INTERPRETATION

$1 \quad 1$ Definitions

In these Rales, unless the contrary intention appears:

AIM means the Alternative Investment Market of the London Stock Exchange.

AIM Listing means admission of the Company's shares to trading on AIM and "AIM Listed" will have the corresponding meaning.

AIM Rules means the rules applicable to companies listed on AIM.

Associated Company means at any time any body corporate that at that time is a related body corporate of the Company within the meaning of section 50 of the Corporations Act.

ASX means Australian Stock Exchange Limited.

ASX Listing Rules means the official listing rules of ASX.

Board means the Directors acting as the Board of the Company.

Business Day means a day on which banks are open for business generally in Western Australia.

Certificate means the certificate issued by the Company to a Holder in respect of an Option.

Change of Control Event means a person, or a group of associated persons, becoming entitled to sufficient shares in the Company to give that person or persons the ability, in general meeting, to replace all or a majority of the Board.

Company means St Barbara Mines Limited (ACN 009 165 066).

Corporations Act means the Corporations Act 2001 (Cth).

Director means a director of the Company from time to time but does not include a person who is only a director by virtue of being an alternate director.

Eligible Employee means a person, other than a director of the Company, who is in the employment of, or consultant to, any Group Company.

Eligible Person means:

an Eligible Employee; $(a)$
$(b)$ the spouse of an Eligible Employee;
a body corporate in which an Eligible Employee holds and beneficially owns not less than 50% of the issued 化 voting share capital;
$(d)$ the trustee of a trust in which an Eligible Employee is a beneficiary or object; or
the trustee of a superannuation fund of which an Eligible Employee is a member. íc)

Exercise Period means in respect of an Option, subject to Rule 10, the period of five years commencing on the Grant Date of that Option.

Exercise Price means, in respect of an Option, the consideration per share, determined in accordance with Rule 9.2, payable by a Holder on exercise of the Option.

Grant Date means the date on which the Board resolves to grant the Option.

Group means, collectively, the Company and each of the Associated Companies.

Group Company means the Company or any Associated Company.

Holder means, in relation to an Option, the person entered in the Company's register of options as the holder of that Option.

Option means an option granted under the Plan to subscribe (subject to Rule 7.2) for one fully paid ordinary share in the capital of the Company.

Permanent Disablement means:

the illness or incapacity of the Eligible Employee necessitating the permanent withdrawal of the Eligible $(a)$ Employee from the work force, as accepted to the satisfaction of the Board; or

$(b)$ any other circumstances which the Board considers should be treated as Permanent Disablement for the purposes of the Plan.

Plan means the St Barbara Mines Limited Employee Option Plan 2001 established in accordance with these Rules as amended from time to time.

Relevant Stock Market means:

AIM, if the Company is listed on AIM; or $\langle a \rangle$
$(b)$ ASX if the Company is fisted on ASX and is not listed on AIM.

Retirement means the termination of an Employee's employment or employment relationship with the Company or a Subsidiary by reason of:

reaching the normal retirement age of the Company or a Subsidiary as determined by the Board from time to $(a)$ time:
participation in an early retirement plan or a voluntary redundancy plan of the Company or a Subsidiary; ĩЫ.
the illness or incapacity of the Employee necessitating the permanent withdrawal of the Employee from the work $(c)$ force: or
$\left(\mathbf{d}\right)$ circumstances which the Board considers should be treated as a Retirement for the Purposes of the Plan,

and retires has a corresponding meaning.

Retrench means to compulsorily terminate the employment or employment relationship of an Employee with the Company or a Subsidiary where the termination is expressed to be on the ground that:

$(a)$ the employment of the Employee is not necessary and his or her position is not to be filled;
$(b)$ the work for which the Employee was engaged is finished; or
the quantity of work required by the Company or a Subsidiary to be undertaken has diminished and has fe) rendered a reduction in the number of Employees necessary,

and retrenchment has a corresponding meaning.

Rules means the rules of this Plan, as amended from time to time.

St Barbara Mines Limited Employee Share Option Plan means the employee share option plan established by the members of the Company at its annual general meeting on 20 October 1995.

Series in relation to Options, means Options with a common Grant Date.

Takeover Period, in relation to a takeover bid in respect of shares in the Company, means the offer period as defined in section 624 of the Corporations Act.

$1.2^°$ Construction

Where the context so admits, any reference in the Plan: $(a)$
to the singular includes the plural and vice versa; and 甾
$(ii)$ to the masculine includes the feminine.
(Ы Any reference in the Plan to an enactment includes the enactment as for the time being amended or re-enacted.
The headings to the Rules are for reference purposes only and are not to affect the meaning or construction of (c) the Rules.

$1.3$ Governing Law

This Plan and any Option granted under it is governed by, and is to be construed in accordance with the law of Western Australia.

$1.4 -$ AIM and ASX requirements

The Board will ensure that the Plan is at all times operated in accordance with the AIM Rules and the ASX Listing Rules.

2. PURPOSE

The purpose of the Plan is to provide an incentive for Holders to participate in the future growth of the Group and, upon becoming shareholders in the Company, to participate in the Group's profits and development.

3. ESTABLISHMENT AND TERMINATION OF THE PLAN

$3.1$ The Board may establish and administer the Plan in accordance with the terms and conditions set out in these Rules.
$3.2₁$ The Board may terminate the Plan at any time that it considers appropriate in its absolute discretion.
Where the Board terminates the Plan the Board cannot grant any further Options under the Plan, but all Options 3.3 already granted remain in existence and, notwithstanding the termination, the Plan continues to have effect in relation to those Options until the last of them lapses.

ENTITLEMENT TO PARTICIPATE 4.

$4.1$ The Board may from time to time determine that an Eligible Person may participate in the Plan and the extent of that participation. In making that determination, the Board must consider:
$(a)$ the seniority of the Eligible Employee and the position the Eligible Employee occupies with the relevant Group Company;
$(b)$ the length of service of the Eligible Employee with the Group;
the record of employment of the Eligible Employee with the Group; $(c)$
$(d)$ the potential contribution of the Eligible Employee to the growth and profitability of the Group;
the extent (if any) of the existing participation of the Eligible Employee (or any relevant other Eligible Person in $\langle e \rangle$ relation to the Eligible Employee) in the Plan; and
伯 any other matters which the Board considers relevant.
$4.2^{\circ}$ The Board may exercise its powers in relation to the participation of any Eligible Person on any number of occasions.
$4.3$ Unless otherwise determined by the Board having regard to the potential contribution of a person to the business of the Group and any other relevant factors, no Option may be granted to an Eligible Person unless the relevant Eligible Employee has been an employee of a Group Company for at least 12 months prior to the Grant Date.

5. ISSUE OF INVITATIONS

5.1 Subject to these Rules the Company (acting through the Board) may, at such times as the Board considers appropriate, issue invitations (in such form as the Board decides from time to time) to Eligible Employees, or any one or more of them, inviting applications for a grant of Options up to the number specified in the invitation (Specified Options) and specifying an acceptance period.
$5.2$ The number of Specified Options will be determined by the Board.

Subject to Rule 8, the Board may exercise its powers in relation to the participation of any Eligible Person on any 5.3 number of occasions.

______________________________________

6. APPLICATIONS

6.1 Following receipt of an invitation, the Eligible Employee or an Eligible Person in respect of that Eligible Employee, as approved by the Board and in whose favour the Employee renounces such invitation (applicant) may apply for the Specified Options.
6.9 The applicant may apply for the full number of Specified Options or part of them (but only in multiples of 1,000 Options) by sending to the Secretary of the Company an application (in the form attached to the invitation) duly signed and completed.
6.3 The application must be received by the Company within the acceptance period specified in the invitation.
The Board is entitled to receive from the applicant any information that the Board considers necessary concerning the $6.4$ applicant and the applicant's entitlement to lodge an application, and may reject any application.

7. GRANT OF OPTIONS

Upon acceptance of a duly signed and completed application for Specified Options, the Company may grant the $71$ Options applied for to the applicant (such person then being known as the Holder). The Company will issue an Option Certificate to each Holder in respect of Options granted to them.
Unless otherwise determined by the Board when it resolves to grant the Option, each Option is granted on the 7.2 following terms:

Exercise of Options

$(a)$ A Holder may only exercise their Options within the Exercise Period.
Ъ) Notwithstanding Rule 7.2(a) above, all Options may be exercised:
during a Takeover Period; ⊕
$\langle \mathbf{ii} \rangle$ at any time after a Change of Control Event has occurred;
$\langle \text{iii} \rangle$ at any time after the announcement of a proposed capital reconstruction referred to in 7.2(k) below; or
$(iv)$ in the Board's absolute discretion, in the event of the death or Permanent Disablement of an Eligible Employee, in respect of Options held by that Eligible Employee or an Eligible Person in respect of that Eligible Employee.
If in the opinion of the Board an Eligible Employee acts fraudulently or dishonestly or is in breach of his or her (c) obligations to any Group Company, then the Board may deem any unexercised Options of the Eligible Employee (or the Eligible Person in respect of the Eligible Employee) to have lapsed.
$(d)$ Any Option which has not been exercised on or before the fifth anniversary of its Grant Date automatically lapses.

Notice of Exercise

Options may only be exercised by notice in writing to the Company delivered to the registered office of the Company. The notice must specify the number of Options being exercised and must be accompanied by:
the Exercise Price for the number of Options specified in the notice; and ⊕

1989 - Andrea Stadt Britannia (h. 1989).

$\langle \mathbf{\hat{n}} \rangle$ the Certificate for those Options, for cancellation by the Company.

The notice only becomes effective when the Company has received the full amount of the Exercise Price for the number of Options specified in the notice in cleared funds.

Issue of certificates

$\langle f \rangle$ Subject to paragraphs (a) to (d) above, within 10 Business Days of the notice referred to in paragraph (e) above becoming effective, the Board must:
$\langle i \rangle$ allot and issue the number of shares specified in the notice to the Holder;
$\langle \mathbf{ii} \rangle$ cancel the Certificate for the Options being exercised; and
$(iii)$ if applicable, issue a new Certificate for any remaining Options covered by the Certificate accompanying the notice.

Allotment of shares

All shares allotted upon the exercise of Options rank pari passu in all respects with other fully paid ordinary $\langle \textbf{g} \rangle$ shares in the Company, and, in particular, entitle their holders to participate fully in:
dividends declared by the Company after the date of allotment; and $\langle i \rangle$
$\langle \mathbf{\hat{n}} \rangle$ all issues of securities offered to holders of ordinary shares where entitlements to participate in those issues are determined by reference to a record date after the date of allotment of shares allotted upon the exercise of Options.

Official quotation

$(h)$ The Company must apply to the London Stock Exchange and to ASX for any new shares issued on the exercise of Options to be admitted to trading on AIM and ASX respectively not later than 10 Business Days after the date of allotment. The Company need not do so, however, if the shares are not then traded on AIM or ASX, as the case may be.

New issues

In the event of a pro rata issue (except a bonus issue) to the holders of shares, the Exercise Price of an Option 尘 may be reduced using the formula:

$$
O' = O - \frac{E[P - (S + D)]}{N + 1}
$$

where:

$\circ$		the new exercise price of the Option

$\circ$ $\equiv$ the old exercise price of the Option.

$\mathbf E$ $=$ the number of shares into which one Option is exercisable.
$\rm{P}$ $\equiv$ the average market price per share (weighted by reference to volume) of the shares during the 5 trading days ending on the day before the ex-rights date or ex-entitlements date.
S $\equiv$ the subscription price for a share under the pro-rata issue.
$_D$ the dividend due but not yet paid on the existing shares (except those to be issued under the pro-rata $\equiv$ issue).
N the number of shares with rights or entitlements that must be held to receive a right to one new $\equiv$ share.

Bonus issues

If from time to time prior to the expiry of any Options the Company makes an issue of any class of shares to 带 the holders of ordinary shares in the Company on a pro-rata basis by way of capitalisation of profits or reserves (other than an issue in lieu of dividends) (a bonus issue) then upon exercise of an Option, each Holder is entitled to have issued (in addition to the shares which would otherwise be issued upon such exercise) the number of shares of the class which would have been issued to the Holder under the bonus issue (bonus shares) if on the date on which entitlements to participate in the bonus issue were calculated the Holder had been registered as the holder of the number of shares of which the Holder would have been registered as holder if immediately prior to that date the Option had been exercised and the shares the subject of such exercise had been duly allotted and issued. The bonus shares must be paid up by the Company out of profits or reserves (as the case may be) in the same manner as was applied in relation to the bonus issue and upon issue rank pari passu in all respects with the other shares of that class on issue at the date of issue of the bonus shares.

Reconstruction of capital

$\langle k \rangle$ In the event that, prior to the expiry of any Options, there is a reconstruction (including a consolidation, subdivision, reduction or return) of the issued capital of the Company, then the number of Options to which each Holder is entitled or the Exercise Price or both will be reconstructed in the manner required by the Listing Rules.

Advice

仆 The Company must give notice to each Holder of any adjustment to the number of shares for which the Holder is entitled to subscribe or to the Exercise Price pursuant to the provisions of paragraphs $(j)$ or $(k)$ above.

Withholding

This Rule 7.2(m) applies if a Holder is fiable to tax, duties or other amounts on the exercise of his Option (m) - 41 and his employer or former employer is liable to make a payment to the appropriate authorities on account of that liability.
$(ii)$ The Board must sell sufficient of the shares which would otherwise be issued to the Holder so that the net proceeds of sale equal the payment which the employer or former employer is required to pay to the appropriate authorities. The Board must account to the employer or former employer for the net proceeds of safe.
$(iii)$ Rule $7.2$ (m) shall not apply, however, if the Holder makes alternative arrangements to the satisfaction of his employer or former employer.

Waiver of Options

A Holder may give up Options in whole or in part by deed. (n)

NUMBER OF OPTIONS TO BE GRANTED 8.

The number of shares the subject of the offer or invitation made as a consequence of an offer or grant of Options when aggregated with:

the number of shares in the same class which would be issued were each outstanding Option to acquire unissued (2) shares under the Plan or the St Barbara Mines Limited Employee Share Option Plan to be exercised; and
(b) the number of shares in the same class issued during the previous 5 years pursuant to the Plan or the St Barbara Mines Limited Employee Share Option Plan;

but disregarding any offer made, or option acquired or share issued by way of or as a result of:

an offer to a person situated at the time of receipt of the offer outside Australia; or ίc).
an offer that did not need disclosure to investors because of section 708 of the Law; $(d)$

1989 - Andrea Stadt Britannia (h. 1989).

must not exceed 5% of the total number of issued shares in the same class at the time of the offer or grant of Options.

9. ISSUE AND EXERCISE PRICE OF OPTIONS

$9.1 -$ Options granted under the Plan will be granted free of charge.
$9.2 -$ The Exercise Price of each Option will be determined by the Board. The Exercise Price must not be less than the greater of:
if there was at least one transaction in the shares on the Relevant Stock Market during the one week period up $\langle a \rangle$ to and including the date of the invitation, the weighted average of the prices at which the shares were traded on the Relevant Stock Market during that period; or
if there were no transactions in the shares on the Relevant Stock Market during the one week period up to and Ъ. including the date of the invitation, the last price at which an offer was made on the Relevant Stock Market to purchase a share.

when the Board resolves to grant the Option.

10. CEASING TO BE AN ELIGIBLE PERSON

10.1 Subject only to Rules 10.2, 10.3 and 10.4 below, if at any time before the commencement of the Exercise Period a Holder ceases to be an Eligible Person, all Options held by him will automatically lapse.
10.2 Subject only to Rules 10.3 and 10.4 below, if at any time during the Exercise Period a Holder ceases to be an Eligible Person, the Holder may, during the period of 30 days after the date on which the Holder ceases to be an Eligible Person, exercise any Option which the Holder would have been entitled to exercise during the Exercise Period. Any Options held by the Holder which are unexercised at the expiry of such 30 day period will automatically lapse.
10.3 For the purposes of these Rules and for the avoidance of any doubt, a Holder will be deemed not to cease to be an Eligible Person (and the Options held by him will therefore not automatically lapse) if the relevant Eligible Employee has ceased to be an employee of a Group Company in order to take up employment with another Group Company and the Eligible Employee does become an employee of another Group Company within 15 Business Days after so ceasing.
10.4 If a Holder ceases to be an Eligible Person by reason of any of the following events, the Options held by that Holder will lapse at the expiration of 12 months after the relevant event:
the Retirement or Retrenchment of the Holder, or if the Holder is not an Employee, the Retirement or Retrenchment of the Employee by virtue of whom an Eligible Person holds Options; or
$(b)$ the bankruptcy or commencement of winding up or deregistration procedures in respect of the Holder; or
the death of the Holder, or if the Holder is not an Employee, the death of the Employee by virtue of whom an (c) Eligible Person holds Options.

11. TRANSFER OF OPTIONS

Each Option is transferable by a Holder if, and only if:

the Holder is entitled to exercise that Option in accordance with these Rules; or $(a)$
the transfer is to the Eligible Employee for whose benefit that Option was originally granted or an Eligible Person ſЫ. in respect of that Eligible Employee.

The instrument of transfer must be in writing, signed by both parties, duly stamped and otherwise in such form as the Board may from time to time prescribe. The Board will not register any transfer of an Option made otherwise than in accordance with this Rule.

12. AMENDMENTS TO THE RULES

12.1 Subject to Rules 12.2 and 12.3, the Board may alter, delete or add to these Rules at any time.
12.2 No amendment to the provisions of the Plan, or to any restrictions or other conditions relating to any Option granted pursuant to the Plan, may be made which reduces the rights of Eligible Persons in respect of Options granted to them prior to the date of the amendment, other than any amendment introduced primarily:
for the purpose of complying with or conforming to present or future State or Commonwealth legislation $(a)$ governing or regulating the maintenance or operation of the Plan or like plans;
$(b)$ to correct any manifest error or mistake; or
to take into consideration possible adverse tax implications in respect of the Plan arising from, amongst $(c)$ others, adverse rulings from the Commissioner of Taxation, changes to tax legislation (including an official announcement by the Commonwealth of Australia) and/or changes in the interpretation of tax legislation by a Court of competent jurisdiction.

......................................

12.3 The Board may make minor amendments to the Plan in order to:
take account of any change in legislation; and/or $\langle a \rangle$
$(b)$ obtain or maintain favourable tax, exchange control or regulatory treatment for Holders, for the Company or any member of the Group, or to benefit the administration of the Plan.
12.4 As soon as is reasonably practicable after making any amendment under Rule 12.1, the Board will give notice in writing of the amendment to any Holder affected by the amendment.

13. POWERS OF THE BOARD

The Plan will be administered by the Board which has the power to:

determine procedures from time to time for administration of the Plan consistent with these Rules; $(a)$
subject to Rule 12, amend or modify these Rules; íЫ
ίc). resolve conclusively all questions of fact or interpretation arising in connection with the Plan; and
$(d)$ delegate to any one or more persons for such period and on such conditions as they may determine, the exercise of the Board's powers or discretions arising under the Plan.

14. MISCELLANEOUS

14.1 Rights and obligations

The rights and obligations of any individual under the terms of his office or employment with any Group Company are not affected by his participation in the Plan and these Rules do not form part of and are not incorporated into any contract of engagement or employment of any individual with a Group Company and do not confer directly or indirectly on an individual any legal or equitable right whatsoever against a Group Company. No individual has any rights of compensation or damages in consequence of the termination of his engagement or employment for any reason whatsoever in so far as those rights arise or may arise from his ceasing to have rights under the Plan as a result of such termination.

14.2 Notices and circulars to shareholders

The Company is not obliged to give a Holder copies of any notices, circulars and other documents sent by the Company to its shareholders until that Holder becomes a shareholder by exercising any or all of their Options.

14.3 Notices to Employees and Holders

The Board may give notice to the person entitled to it either personally or through the internal post or by sending $(a)$ it by post to the address supplied by him for that purpose.
Where a notice or document is sent by post it shall be deemed to have been received 7 days after it was put into (b) the post. All notices and documents sent by post will be sent at the risk of the addressee.

14.4 Notices to the Company

An Employee or a Holder may give notice to the Company or the Board by delivering it to, or sending it to, the Company at its registered office marked for the attention of the Company Secretary. The Board may make other arrangements for the receipt of notices.

14.5 Costs and expenses

The Company will pay the cost of the preparation and operation of the Plan.

Independent expert's report - 19 October 2004

St Barbara Mines Limited

Delokte Coroprate Finance Ptv Limited A.B.N. 19 003 833 127 AFSL 241457 Central Park Level 16 152-158 St. Georges Terrace Perth WA 6000 Tel: +61 (0) 2 9322 7000

Financial services guide

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No. 241457. The contents of this FSG include:

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Information about us

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Deloitte Corporate Finance Pty Limited A.B.N. 19 003 833 127 AFSL 241457

Central Park Level 16 152-158 St. Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

DX 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloitte.com.au

19 October 2004

The Directors St Barbara Mines Limited Level 2 16 Ord Street WEST PERTH WA 6005

Dear Sirs

Independent expert's report

§. Intractuation

On 20 September 2004, St Barbara Mines Limited (St Barbara or the Company) announced the following transactions:

an initial sale of 100 million NuStar Mining Corporation Limited (NuStar) shares (Initial Sale) to third parties at \$0.04 per share, which was completed on 30 September 2004
the sale of the Paulsens 5% royalty (Paulsens Royalty) owned by the Company to NuStar for \$5.1 million ٠ and the sale of the Company's interest in the Pelican Joint Venture
the grant of a call option to Claymore Capital Pty Ltd (or its nominees) to purchase 100 million NuStar ۰ shares at \$0.05 per share at any time up to 16 May 2005 and
a pro-rata share buy-back of up to 192 million St Barbara shares to be effected through a share swap of up to 240 million shares in NuStar on the basis of 1.25 NuStar shares for every St Barbara share held (Share Buyback).

Following the Initial Sale St Barbara owns 442,712,338 shares in NuStar, being 44.7% of the issued share capital of NuStar.

Purpose of the report 2.

The directors of St Barbara have requested Deloitte Corporate Finance Pty Ltd (Deloitte Corporate Finance) to provide an independent expert's report incorporating:

an opinion on whether the proposed sale of the Paulsens Royalty (Proposed Sale) is fair and reasonable to St Barbara's ordinary shareholders (Shareholders) and
٠ a valuation of St Barbara and NuStar shares to assist Shareholders in considering the resolution to approve the Share Buy-back.

The independent expert's report in respect of the Proposed Sale is required pursuant to Australian Stock Exchange Limited (ASX) Listing Rule 10 to assist Shareholders in their decision whether or not to approve the Proposed Sale. We have prepared this report having regard to the relevant Australian Securities and Investment Commission (ASIC) Policy Statements and Practice Notes. We have also relied on a report prepared by AMC Consultants Pty Ltd (AMC), a mining industry specialist whose report was prepared in accordance with the Australian Institute of Mining and Metallurgy's (AusIMM) Code and Guidelines for Technical Assessment and/or Valuation of Mineral and Petroleum Assets and Mineral and Petroleum Securities for Independent Expert Reports (the Valmin Code) of 17 February 1995, as amended in March 1998.

The directors of St Barbara have requested a valuation of St Barbara and NuStar shares after considering the ASIC guidance given in Policy Statement 110, paragraph 46. The valuation is provided to assist Shareholders in their evaluation of the Share Buy-back. We do not give an opinion as to whether or not Shareholders should approve the Share Buy-back resolution or participate in the Share Buy-back. Shareholders should obtain independent advice in this regard.

This report is to accompany the Explanatory Memorandum and Notice of General Meeting to be sent to Shareholders to convene a meeting of Shareholders on or about 29 November 2004. The purpose of the meeting, amongst other things, will be to seek approval for the Proposed Sale and the Share Buy-back.

Basis of evaluation 3.

In evaluating fairness and reasonableness, we have considered ASIC policy statements and common market practice.

ASIC Policy Statement 74 provides guidelines for independent experts on how to evaluate whether or not a proposed transaction is fair and reasonable to shareholders when preparing reports. In relation to the Proposed Sale, Policy Statement 74 states that the evaluation should:

be judged on the basis of all the circumstances of the Proposed Sale
compare the likely advantages and disadvantages to the Shareholders if the Proposed Sale is agreed to, with ٠ the advantages and disadvantages to the Shareholders if it is not
consider the value of the Paulsens Royalty with reference to the terms of the Proposed Sale, but this should ٠ not be the sole factor in evaluating the Proposed Sale.

In forming our opinion on whether on not the Proposed Sale is fair and reasonable to Shareholders we have performed a valuation of the Paulsens Royalty and considered the advantages and disadvantages of the Proposed Sale. We have also considered whether the advantages outweigh the disadvantages.

To assist Shareholders evaluate the Share Buy-back we have:

estimated the fair market value of an ordinary share in St Barbara and estimated the fair market value of an ordinary share in NuStar
calculated the ratio of the fair market value of a NuStar share to the fair market value of a St Barbara share ٠ (Fair Market Value Ratio) and the ratio of the recent share price of a NuStar share to the recent share price of a St Barbara share (Trading Price Ratio) to enable Shareholders to compare these ratios to the ratio offered, being 1.25 NuStar shares for every St Barbara share (Share Buy-back Ratio).

4. Summary and conclusion

Evaluation of the Proposed Sale

In our opinion the Proposed Sale is fair and reasonable.

In forming our opinion as to whether the Proposed Sale is fair and reasonable we have considered the following:

Advantages

The likely advantages to Shareholders if the Proposed Sale is approved are:

The consideration offered by NuStar is fair

We have estimated the fair market value of the Paulsens Royalty using the discounted cash flow method, together with an appropriate adjustment for the lack of marketability of the asset.

The discounted cash flow method estimates value by discounting the estimated future cashflows associated with the Paulsens Royalty to their present value and therefore requires the determination of an appropriate discount rate and the projection of future cash flows. We have relied on AMC's report setting out the gold production estimates for the Paulsens project as the basis of our estimated future cash flows. We have discounted the cashflows at a rate of 9% being the real post-tax discount rate used to value the Paulsens project held by NuStar (refer Appendix 2).

The discounted cash flow value, however, does not take into account the marketability issues that affect the ability to sell the Paulsens Royalty to a third party buyer. These issues include the limited pool of specialised buyers, the relatively small size of the asset and the limited access to detailed information on the underlying Paulsens project that is available to prospective buyers. Empirical studies of marketability discounts indicate that these can be significant, ranging from 10% to 40% depending on the circumstances. We have chosen a marketability discount of 20% to apply to the discounted cash flow value to derive the fair market value of the Paulsens Royalty.

Set out in the table below is a comparison of our assessment of the fair market value of the Paulsens Royalty with the cash consideration offered by NuStar.

Estimated fair market value of Paulsens Royalty (Section 7)	54
Cash consideration offered

The consideration offered by NuStar is within the range of our estimate of the fair market value of the Paulsens Royalty.

The Proposed Sale, in conjunction with the Share Buy-back, is part of St Barbara's board of directors' (the Board's) strategy to re-position St Barbara

After being appointed by Shareholders in July 2004, the Board undertook a detailed review of the finances and assets of the Company and concluded that the Company required an injection of funds to discharge existing indebtedness and provide working capital. In addition, the Board decided that strategically it should focus on its exploration activities, which led to the decision to substantially divest its effective interests in the Paulsens project, being the Paulsens Royalty and the shareholding in NuStar. A secondary benefit of the divestment process identified by the Board is that it potentially enables the three major Shareholders that are opposed to the new Board to switch their shareholding out of St Barbara into NuStar, thus benefiting all other Shareholders of St Barbara.

The Proposed Sale will provide St Barbara with the financial means to recommence its exploration activities and pursue other acquisition and joint venture opportunities

The Proposed Sale, along with the funds received from the Initial Sale and the Option, will enable external secured borrowings to be repaid in full, payments to be made to creditors and for other short term liabilities to be extinguished. It will also provide a source of working capital and resources for the immediate exploration of the Meekatharra exploration area and enable the Company to consider other opportunities that may arise.

Limited opportunities for sale of the Paulsens Royalty

Prior to the conclusion of the agreement with NuStar, St Barbara's Board was undertaking a tender sale process in respect of the Paulsens Royalty. Although this process did not run to conclusion, it yielded an offer substantially below the \$5.1 million price and highlighted significant issues surrounding the marketability of the Paulsens Royalty. These issues included the fact that there is only a small pool of specialised buyers for such an asset and for most of these prospective buyers the Paulsens Royalty is too small. In addition, there is limited detailed information available to a prospective buyer about the underlying Paulsens project.

Following the appointment of the new St Barbara Board in July 2004, the Boards of St Barbara and NuStar are independent of each other and St Barbara exercises no management influence over NuStar. The negotiation of the Proposed Sale was therefore an arms length process, with each Board ensuring that it received the best possible outcome for its shareholders.

Disadvantage

The likely disadvantage to Shareholders if the Proposed Sale is approved is:

The sale of the Paulsens Royalty means that the Company will no longer have the prospect of a regular cash inflow beginning in 2005

At present the Company enjoys the prospect of receiving a regular stream of cash inflows from the Paulsens Royalty, starting in mid-2005. These inflows would contribute ongoing working capital for the Company over the next six years. This future cashflow stream is being given up in exchange for a lump-sum inflow now.

Implications if the Proposed Sale is not approved

If the Proposed Sale is not approved by Shareholders, St Barbara will have to find alternative sources of short term funding in order to pursue exploration activities and to fund working capital.

Evaluation of Share Buy-back

Set out below is our assessment of the Fair Market Value Ratio and Trading Price Ratio, compared to the Share Buy-back Ratio.

	I KOTA RATION	Hom term Ca
Estimated fair market value of a St Barbara share (Section 9)	2.3	3.5
Estimated fair market value of a NuStar share (Section 8)	2.2	3.I
Fair Market Value Ratio	1.05	1.14
Trading price of a St Barbara share (Section 9.4)	4.2	5.9
Trading price of a NuStar Share (Section 8.4)	3.6	4.6
Trading Price Ratio	1.17	1.28
Share Buy-back Ratio	1.25	1.25

The value of a St Barbara share is inherently linked to the value of a NuStar share due to St Barbara's 44.7% shareholding in NuStar. Therefore, if the value of NuStar is towards the upper end of our valuation range, then it is likely that the value of St Barbara will also be towards the upper end of our valuation range.

Depending on individual Shareholder circumstances there are potential taxation consequences of accepting the Share Buy-back. Shareholders should seek their own independent advice in this regard.

Valuation of a St Barbara share

The fair market value of a St Barbara share has been estimated using the net assets method on a going concern basis incorporating the value of the mining assets using various methods as determined by AMC. We have also referred to the share trading history of St Barbara shares over the past three months.

Valuation of a NuStar share

The fair market value of a NuStar share has been estimated using the net assets method on a going concern basis incorporating the value of the mining assets using the discounted cashflow method. We have also referred to the share market trading history of NuStar shares over the past three months.

Impact of Share Buy-back on St Barbara

The impact of the Share Buy-back on St Barbara depends on the number of Shareholders that elect to participate in the Share Buy-back and hence the outcome is uncertain at this stage. However, certain Shareholders have provided St Barbara with undertakings of the manner in which they will act in relation to the Share Buy-back, namely:

Resource Capital Fund II LP (RCF), which currently holds 21.9% of St Barbara's issued share capital. will not participate in the Share Buy-back
Ocean Resource Capital Holdings Plc (Ocean), Strata Mining Corporation Ltd (Strata) and Toto Capital Inc (Toto), which currently collectively own 21.5% of St Barbara's issued share capital, will participate in the Share Buy-back in respect of all of their St Barbara shares.

An individual Shareholder's decision in relation to the Proposed Sale and the Share Buy-back may be influenced by his or her particular circumstances. If in doubt Shareholders should consult an independent adviser.

This opinion should be read in conjunction with our detailed report which sets out our scope and findings. Our opinion is based solely on information available as at the date of this report. In particular, we have placed reliance on the report of AMC, the independent mining industry specialist engaged by us. The AMC report is attached as Appendix 6.

Yours faithfully

DELOITTE CORPORATE FINANCE PTY LIMITED

Tom Henderson

Stephen Reid Director

Director

1	Outline of the Proposed Sale and Share Buy-back	1
1.1	Summary	1
1.2	Purpose of the Proposed Sale and Share Buy-back	1
1.3	Impact of the Share Buy-back on St Barbara	1
$\mathbf{2}$	Scope of the report	3
2.1	Purpose of the report	3
2.2	Basis of evaluation - Proposed Sale	3
2.3	Basis of evaluation - Share Buy-back	3
2.4	Limitations and reliance on information	3
3	Overview of the Gold Industry	4
3.1	Structure of industry	4
3.2	Pricing	4
3.3	Production	4
3.4	Industry forecast	5
4	Profile of St Barbara	6
4.1	Company history	6
4.2	Mining assets	6
4.3	Paulsens Royalty	7
4.4	Legal structure	7
4.5	Capital structure and shareholders	7
4.6	Share price performance	9
4.7	Financial performance	11
4.8	Financial position	12 ₂
4.9	Contingent liabilities	13
5	Profile of NuStar	14
5.1	Company history	14
5.2	Mining assets	14
5.3	Legal structure	14
5.4	Capital structure and shareholders	14
5.5	Share price performance	15

5.6	Financial performance	17
5.7	Financial position	18
6	Valuation methodology	19
6.1	Valuation methodologies	19
6.2	Selection of valuation methodologies	20
7	Valuation of Paulsens Royalty	21
8	Valuation of NuStar	22
8.1	Net assets method	22
8.2	Analysis of recent share market trading	23
8.3	Number of shares on issue	23
8.4	Summary of valuation methods and conclusion	23
9	Valuation of St Barbara	24
9.1	Net assets method	24
9.2	Analysis of recent share market trading and share placements	26
9.3	Number of shares on issue	26
9.4	Summary of valuation methods and conclusion	26
10	Evaluation	27
10.1	Evaluation of Proposed Sale	27
	10.2 Evaluation of Share Buy-back	28
	Appendices

$1₁$ Glossary
$2.$ Discount rate calculation
$3₁$ Description of comparable entities
$\overline{4}$ . Sources of information
$5.$ Qualifications, declarations and consents
$6.$ AMC specialist valuation report

Outline of the Proposed Sale and Share Buy-back 1

1.1 Summary

On 20 September 2004, St Barbara announced the following transactions (collectively the Transactions):

the Initial Sale of 100 million NuStar shares to third parties at \$0.04 per share which was completed on 30 September 2004
the Proposed Sale of the Paulsens Royalty to NuStar for \$5.1 million and the sale of the Company's interest in the Pelican Joint Venture for an initial consideration of \$50,000 and a subsequent payment of \$400,000, dependent on the establishment of a mining reserve
the grant of an option to Claymore Capital Pty Ltd (or its nominees) to purchase 100 million NuStar $\bullet$ shares at \$0.05 per share at any time up to 16 May 2005 (the Option)
a pro-rata Share Buy-back of up to 192 million St Barbara shares to be effected through a share swap of up to 240 million shares in NuStar on the basis of 1.25 NuStar shares for every St Barbara share held.

Following the Initial Sale, St Barbara owns 442,712,338 shares in NuStar, being 44.7% of the issued share capital of NuStar. If the remaining transactions are implemented in full, St Barbara will have effectively divested all but 102 million of its NuStar shares, leaving it with a holding of approximately 10% in NuStar. The issued share capital of St Barbara will be reduced to 523 million shares, after the cancellation of the shares bought back.

Our report does not consider the Initial Sale, the sale of St Barbara's interest in the Pelican Joint Venture or the grant of the option to Claymore Capital Pty Ltd.

12 Purpose of the Proposed Sale and Share Buy-back

The Transactions are inter-related and the overall purpose is to achieve a re-positioning of St Barbara as a mining exploration company. Since the Paulsens project is currently entering the development phase, the divestment of the Paulsens Royalty and the stake in NuStar are critical to the achievement of this re-positioning.

The Board has considered that some Shareholders invested in St Barbara specifically to gain access to NuStar's Paulsens gold project and therefore the divestment of NuStar was structured partially as a Share Buy-back to allow such Shareholders to retain their exposure to NuStar by accepting the Share Buy-back.

1.3 Impact of the Share Buy-back on St Barbara

RCF, which currently holds 21.9% of St Barbara's issued share capital, will not participate in the Share Buy-back
Ocean, Strata and Toto, which currently collectively own 21.5% of St Barbara's issued share capital, will participate in the Share Buy-back in respect of all of their St Barbara shares.

The level of participation of the Other Shareholders in the Share Buy-back will determine the composition of the shareholders of St Barbara and NuStar. The table below sets out the range of possible outcomes of the Share B any NuStar shares prior to the Share Buy-back:

	100% participation by Other Shareholders	0% participation by Other Shareholders
St Barbara shares bought back	192 million	153.7 million
St Barbara shares on issue after Share Buy-back	523.3 million	561.6 million
% of St Barbara shares held after Share Buy-back:
RCF	29.9%	27.8%
Ocean, Strata and Toto	19.3%	0%
Other Shareholders	50.8%	72.2%
% of NuStar shares held after Share Buy-back
St Barbara	20.5%	25.3%
RCF	$0\%$	0%
Ocean, Strata and Toto	$6.7\%$	19.4%
Other St Barbara Shareholders	17.6%	$0\%$
Other NuStar Shareholders ٠	55.3%	55.3%

RCF's interest in St Barbara will increase under all scenarios, to a minimum of 27.8% and a maximum of 29.9% from a current holding of 21.5%.

Scope of the report $\mathbf{2}$

$2.1$ Purpose of the report

Under ASX Listing Rule 10, an independent expert's report is required to be prepared where a substantial asset of an entity is proposed to be sold to a subsidiary. The report must state whether the proposed transaction is fair and reasonable to shareholders. As NuStar was a subsidiary of St Barbara at the time the Proposed Sale was announced and the Paulsen's Royalty is a substantial asset of St Barbara, an independent expert's report is required.

St Barbara's directors have also requested that an independent expert's report be prepared with respect to the Share Buy-back, following ASIC guidance given in Policy Statement 110, paragraph 46. A valuation of a St Barbara share and a NuStar share is provided to assist shareholders in their evaluation of the Share Buy-back. We do not give an opinion as to whether or not Shareholders should approve the Share Buy-back resolution or participate in the Share Buy-back. Shareholders should obtain independent advice in this regard.

Basis of evaluation - Proposed Sale $2.2 -$

In evaluating fairness and reasonableness, we have considered ASIC policy statements and common market practice.

be judged on the basis of all the circumstances of the Proposed Sale $\bullet$
compare the likely advantages and disadvantages to the Shareholders if the Proposed Sale is agreed to, $\bullet$ with the advantages and disadvantages to the Shareholders if it is not
consider the value of the Paulsens Royalty with reference to the terms of the Proposed Sale, but this $\bullet$ should not be the sole factor in evaluating the Proposed Sale.

Basis of evaluation -- Share Buy-back $2.3$

The Share Buy-back is structured as a swap of NuStar shares for St Barbara shares i.e. Shareholders are being offered the Share Buy-back Ratio. In order to evaluate the Share Buy-back, it is therefore necessary to compare the fair market value of a NuStar share to the fair market value of a St Barbara share and to calculate the Fair Market Value Ratio. This is done by dividing the fair market value of a St Barbara share by the fair market value of a NuStar share and shows the number of NuStar shares required to equal the value of one St Barbara share

In evaluating the Share Buy-back it is also relevant to calculate the Trading Price Ratio. The Fair Market Value Ratio and the Trading Price Ratio can then both be compared to the Share Buy-back Ratio.

$2.4$ Limitations and reliance on information

In preparing this report and arriving at our opinion and evaluations we have considered and relied upon a number of sources of information as detailed in Appendix 4.

The opinion of Deloitte Corporate Finance is based on economic, market and other conditions prevailing at the date of this report, including in particular the spot gold price and the spot exchange rates. Such conditions can change significantly over relatively short periods of time. This report should be read in conjunction with the declarations outlined in Appendix 5.

Our procedures and enquiries do not include verification work nor constitute an audit in accordance with Australian Auditing Standards (AUS), nor do they constitute a review in accordance with AUS 902 applicable to review engagements.

Overview of the Gold Industry 3

$3.1$ Structure of industry

Gold is traded on the basis of price, which is affected by the relationship between supply and demand. The demand for gold comes from consumers, industry and investors with primary users being the electronic equipment manufacturing industry, jewellers and dental practitioners.

$3.2 -$ - Pricina

The international gold price can be extremely volatile, largely due to the role gold plays as a store of value and a hedge against inflation. Gold is a globally traded commodity that covers spot sales, forward sales and a range of derivative financial instruments such as options.

The revenue of an Australian based gold producer is dependent, amongst other things, upon:

fluctuations in the United States dollar (USD) spot gold price
the exchange rate between the USD and the Australian dollar (AUD) and
the extent to which the producer has undertaken hedging of future production and the timing and nature of the hedging transactions.

The graph below shows the AUD gold spot price versus the USD gold spot price and the AUD/USD exchange rate over a nine year period.

Figure 1: AUD and USD gold spot rates and AUD/USD exchange rate

Source: Bloomberg

Following the terrorist attacks on the United States of America on 11 September 2001 and continuing uncertainty with respect to terrorist activities, the USD spot gold price increased as investors used gold as a store of value. Gold prices subsequently eased, but then rose again in response to tensions in the Middle East and between India and Pakistan. Gold prices rose again in 2003 as a result of military action against Iraq.

IBISWorld Pty Ltd (IBIS) in a report entitled "Gold Ore Mining in Australia", published 1 October 2004 (IBIS Report), reported a decrease of 13.5% in industry turnover within Australia during the 2004 financial year largely due to an 8% decrease in the average AUD gold price.

3.3 Production

During the 2003 financial year sustained higher gold prices resulted in large cash inflows to gold producers, which in turn increased exploration expenditure, the start up of new mines and extensions to the mine life of a number of existing Australian mines.

According to the IBIS Report, gold production in Australia declined in the 2004 financial year to 260 tonnes compared to 277 tonnes recorded in the previous year. This was partly a response to cyclone activity in early 2004 and also as lower grade ore was processed.

3.4 Industry forecast

Further price rises are anticipated during the 2005 financial year as a result of the continued concern over terrorism, however it is unlikely that the high price will be sustained in the long term. The current high gold price has resulted in increased world gold production which will, in itself, lead to a downward pressure on the price as will further gold sales by central banks. The prospect of higher central bank sales effectively acts as a cap on gold prices.

In Australia the AUD gold price is expected to increase in the short term reflecting the stronger USD gold price and the slight weakening of the Australian dollar against the USD. In the longer term, however, the expected decrease in the USD spot price will be too great to be offset by any depreciation of the AUD.

Production within Australia is expected to increase strongly as new mines come into operation and existing ones reach full capacity. Production at the Telfer mine will commence in late 2004 and several mines including Bendigo mine in Victoria and Cracow mine in Queensland are expecting increases in production in the coming years. IBIS is forecasting an increase in production from 260 tonnes in the 2004 financial year to 320 tonnes in the 2006 financial year.

Profile of St Barbara 4

$4.1$ Company history

St Barbara was incorporated and listed in Victoria in March 1969 as Endeavour Oil Company NL. It was subsequently listed on the Official List of ASX in May 1969. In 1991 the Company adopted its present name, St Barbara Mines Ltd, after changing its status from a no liability company to a public company limited by shares. The Company also changed its state of incorporation to Western Australia and redirected its focus of business from oil and minerals exploration to gold exploration and production.

In July 2000 St Barbara announced a takeover bid for NuStar (formerly Taipan Resources NL) to facilitate the development of NuStar's Paulsens gold project and to complement its existing operation, the 100% owned Meekatharra gold operations in Western Australia. Since then, St Barbara has progressively decreased its holding in NuStar and now owns 44.7%. In October 2002, St Barbara acquired Paddy's Flat from Plutonic Operations Limited for \$4.5 million and \$10 per ounce of gold on all production exceeding 50,000 ounces per annun

St Barbara completed a dual listing on the Alternative Investment Market of the London Stock Exchange (AIM) on 8 July 2002.

4.2 Mining assets

The Meekatharra gold operations are located in the Murchison District of Western Australia. This region is highly regarded within Western Australia and rated only behind the Eastern Goldfields. The Meekatharra gold operations include land that covers 2,443 km² between Paddy's Flat and Tuckanarra. The property contains eight open pit mines, two underground mines and a processing plant and gold room. The remaining area is covered by mining leases.

St Barbara's primary asset has been the Bluebird mine that has recorded total production from 1986 to 2004 of 31.7 million tonnes. Mining operations were suspended from July 1998 to mid 2000 while low grade stockpiles were treated and then continued through open pit and underground mining until early 2003, from which date the plant has been on care and maintenance.

Paddy's Flat is located 15km² northeast of St Barbara's existing treatment plant. The acquisition in 2002 included a total of 107km² of granted tenements of which St Barbara incorporated 56km² as part of the Annean Joint Venture. The remaining 51km² contains all the known significant gold deposits. Included in the acquisition were physical assets estimated to cover the costs of rehabilitation associated with former mining sites.

During the 2004 financial year St Barbara has formed a number of joint ventures using its tenements at Meekatharra, these include:

the Annean Joint Venture with Aurogenic Resources Pty Ltd (Aurogenic). Under the terms of the agreement dated 24 March 2004, Aurogenic can earn a 45% interest by spending \$3 million on exploration within two years with a minimum commitment of \$1 million within one year. Aurogenic has the option of earning a 51% interest if it spends \$4 million on exploration within three years and then can earn 70% for \$8 million expenditure within five years from commencement. To 30 June 2004 the joint venture expenditure totalled \$172,000 and it is estimated that some \$400,000 has been expended to date
the Pollele Joint Venture with Elara Mining Ltd (Elara). This joint venture, formed on 10 November 2003, gives Elara the right to earn 51% for \$3 million of expenditure on exploration within two years and the right to earn a 65% interest for \$5 million of expenditure in four years. The minimum commitment in the first year is \$1 million and by July 2004 Elara had spent \$560,000
the Reedy's Joint Venture with Elara. From 10 November 2003, Elara has the right to earn a 51% interest in the project by spending \$3.25 million on exploration within two years and a 65% interest by spending \$5.25 million in four years. The minimum commitment in the first year is \$750,000 and by 31 August 2004 Elara had spent \$350,000
the Chesterfield Joint Venture with Independence Gold NL (Independence) and Aurex Consolidated Ltd (Aurex). The joint venture includes more than 190km2 of granted tenements of which \$500,000 has been spent testing two small, fairly high grade, resources containing a combined 8,000 ounces of gold. A new agreement entered into in September 2004 allows Aurex to earn 60% by spending \$400,000 in exploration prior to 30 June 2007 (with a minimum commitment of \$100,000 in the first

year), paying Independence and St Barbara each \$250,000 and providing them with a "free carry" to commencement of a feasibility study.

St Barbara currently has nine other 100% owned mining tenements within the Meekatharra project.

Paulsens Royalty 4.3

The Paulsens Royalty entitles the owner to 5% of the gold production of the Paulsens project, in excess of 6,000 ounces. St Barbara acquired the Paulsens Royalty from Rio Tinto Exploration Pty Ltd in September 2001 for \$3 million.

The Paulsens Royalty arose originally from the tenement sale agreement in respect of the 1995 acquisition of the Paulsens tenements by NuStar.

Legal structure 4,4

The figure below sets out a simplified group structure for St Barbara. The subsidiaries listed are only those that are currently active.

Figure 2: St Barbara group structure

Source: St Barbara Management

$4.5$ Capital structure and shareholders

As at the date of this report St Barbara had the following shares and options on issue:

715.27 million ordinary shares
84.84 million unlisted share options to acquire ordinary shares. The expiry dates for the options range $\bullet$ from 15 July 2005 to 17 January 2008. All options are currently "out of the money".

St Barbara's top 20 shareholders as at 30 September 2004 are included in the table below.

				Table 1: St Barbara Top 20 share register as at 30 September 2004

Shareholder	Number of Shares	% of total shares on issue
RCF	156,333,470	21.86%
Westpac Custodian Nominees Ltd	115,188,499	16.10%
Ocean	72,480.547	10.13%
HSBC Custody Nominees (Australia) Ltd	38,539,738	5.39%
Strata	32,200,000	4.50%
Toto	14,000.000	1.96%
ANZ Nominees Ltd	9,308,407	1.30%
Spartan Nominees Limited	6,250,000	0.87%
National Nominees Ltd	6,222,598	0.87%
Yamatji Marlpa Barna Baba Maaja Aboriginal Corporation	5,600,000	0.78%
Tricom Nominees Pty Ltd	4,233,334	0.59%
Kizogo Pty Ltd	4,166,666	0.58%
Beck Corporation Pty Ltd	2,800,000	0.39%
Miroma Investment Inc.	2,737,449	0.38%
Citicorp Nominees Pty Ltd	2,564.559	0.36%
Wundee Australia Pty Ltd	2,450,000	0.34%
Mr Yoshihito Koguchi	2,100.000	0.29%
Balcony Developments Pty Ltd	1,948,400	0.27%
Ofex Register	1,832.671	0.26%
Mr Ritesh Mistry	1,720,000	0.24%
Total Top 20 Shareholders	482,676,338	67.48%
Other shareholders	232,594.819	32.52%
Total	715,271,157	100%

Source: St Barbara management

St Barbara's substantial shareholders as at 30 September 2004 are identified in the table below.

Table 2: St Barbara substantial shareholders as at 30 September 2004

Substantial Shareholders	Number of Shares	% of total shares on issue
RCF	156,333,470	21.86%
Ocean	107,480,507	16.02%
RAB Europe Fund Ltd	45,000,000	6.29%
St James' Place Recovery Trust	40,430,000	5.65%

Source: St Barbara Annual Report

As can be seen from the above tables, RCF is St Barbara's major shareholder with 21.86%, Ocean is the next largest shareholder with 16.02% overall.

4.6 Share price performance

St Barbara's share price history for the past two years is included in the table below.

Construction Construction	Hienter	LATOR	Last Trade (6)	Volume (000)
30/9/2002	0.215	0.135	0.135	74,353
31/12/2002	0.14	0.096	0.115	50,270
31/3/2003	0.155	0.065	0.078	66,833
30/6/2003	0.082	0.035	0.04	59,314
30/9/2003	0.11	0.039	0.089	143,299
31/12/2003	0.105	0.066	0.072	80,551
31/3/2004	0.074	0.045	0.062	38,003
30/6/2004	0.063	0.042	0.048	29,885
30/9/2004	0.061	0.04	0.043	48,676

Table 3: St Barbara ASX quarterly share price information

Source: Bloomberg

The St Barbara share price has followed a downward trend from September 2002 before recovering in the 2003 September quarter. The announcement of the debt for equity swap in 2003 and stronger gold prices led to a recovery in the price above \$0.08, however, since October 2003 the share price has declined. The share price recorded at 30 September 2004 was \$0.043.

Historical share prices and trading volumes are presented graphically in figure 3.

Figure 3: St Barbara stock activity on ASX

Source: Bloomberg

The table below details the significant company announcements related to movements in the share price and significant volumes traded.

Note	Date	Comment
	9/01/2003	Release of proposed merger with Geomaque Explorations Ltd and Midas Gold Plc
2	11/07/2003	Change in substantial shareholders
3	26/09/2003	Paddy's Flat development for the potential of a technically and economically viable operation at 30,000 tonnes per month remains on plan for the 2005 production schedule
4	24/10/2003	Announcement that the Burnakura JV could potentially return an early cashflow
5	31/10/2003	Announcement of debt for equity swap to finance the Paulsens project within subsidiary company Taipan
6	14/01/2004	Release of positive drilling results at Meekatharra
7	19/03/2004	New high grade zone identified at Cue Goldfield project
8	2/07/2004	Media release by the Takeovers Panel that they decided not to hear the proceedings in relation to the application lodged by Strata alleging unacceptable circumstances in relation to the affairs of St Barbara.
Q.	23/07/2004	Issue and allotment of shares from private placement previously announced
10	20/9/2004	Announcement of the Transactions

Table 4: Announcements impacting recent share market price of St Barbara shares

Source: Bloomberg

The figure below illustrates the movement in the St Barbara share price against the movement in the USD spot gold price.

Source: Bloomberg

St Barbara's share price historically showed some correlation to movements in the gold price, however, the recent increase in the spot price of gold has had little effect on the share price, since the Company ceased production at Meekatharra.

$\mathbb{A}$ , $7$ Financial performance

The adjusted financial results of St Barbara, excluding NuStar, for the years ending 30 June 2002, 2003 and 2004 are summarised in the table below.

	Table 5: Financial results

	Audited $Jun-02$ \$'000	Audited Jun-03 \$000	Audited Jun-04 \$000
Revenue Gold Sales	54.516	56.111	21,972
Other Revenue	31.966	1.438	10.053
Total revenue	86.482	57,549	32,025
EBITDA	15,081	(7.846)	(19,605)
Depreciation and amortisation	(30,204)	(18, 347)	(2, 722)
EBIT	(15, 123)	(26, 193)	(22, 327)
Net interest expense	(3.036)	(3.937)	(2,901)
Profit/(Loss) before tax	(18, 159)	(30, 130)	(25, 228)
Tax	$\overline{r}$	(2,855)	$\tilde{\phantom{a}}$
Net profit/(loss) from ordinary activities after tax	(18, 159)	(32,985)	(25, 228)

Source: St Barbara Annual Report

During 2004 financial year the following events had a significant effect on the underlying result compared to the previous year:

cessation of Meekatharra operations in the second half of the year significantly reduced revenue $\bullet$
tenement write-downs recorded during the year of \$5.6 million. ٠

Financial position $4.8$

The adjusted statements of the financial position of St Barbara, excluding NuStar, as at 30 June 2002, 2003 and 2004 are summarised in the table below.

Table 6: Financial position
	Jun-02 Audited \$'000	Jun-03 Audited \$'000	Jun-04 Audited \$'000
Current assets
Cash	9,030	596	I
Restricted Cash		280
Receivables	2.946	3.682	158
Other Financial Assets		4,891	21,888
Inventories	5,151	4,264	777.
Assets held for Resale	5,409	4,194	58
Other	1,505	1,250	630
Total current assets	24,041	19,157	23,512
Non-current assets
Restricted Cash	1,837	3,293	2,765
Other Financial Assets	29,765	16,635
Property, plant and equipment	9,848	8,362	4,929
Other	232	83.
Deferred tax assets	2,965
Mining Properties	43,647	46,372	40,685
Total non-current assets	88,294	74,745	48,379
Total assets	112,335	93,902	71,891
Current liabilities
Payables	15,893	10,555	5,894
Interest bearing liabilities	5,857	7,136	8,932
Provisions	1,037	898	751
Total current liabilities	22,787	18,589	15,577
Non-current liabilities
Interest bearing liabilities	4,517		75
Provisions	2,559	3,876	4,269
Total non-current liabilities	7,076	3,876	4,344
Total liabilities	29,863	22,465	19,921
Net assets	82,472	71,437	51,970

Source: St Barbara Annual Report

During the 2004 financial year significant changes made to the affairs of the Company included:

sale of the Dioro Exploration NL investment for \$4.48 million $\bullet$
sale of Komatsu inventory for \$2.3 million
St Barbara converted a \$17.6 million loan asset owed by NuStar into 352,000,000 fully paid ordinary shares in NuStar
St Barbara issued 111.595.854 fully paid ordinary shares to RCF in satisfaction of the interest, facility fees and the debt owed to RCF totalling \$8,249,863
St Barbara issued 35 million fully paid ordinary shares at \$0.08 per share for \$2.8 million to partly satisfy the convertible note loan. This resulted in the remaining face value owing being reduced to \$4.4 million.

Subsequent to the year ended 30 June 2004 and up to the date of our report a number of events have occurred that have resulted in significant changes to the funds available to the Company.

on 15 July 2004, the Company announced the conversion by Ocean of the face value of its convertible note of \$4.4 million into 55,000,000 ordinary shares at \$0.08. Interest due on the convertible note loan was also satisfied by the issued of 17,480,547 fully paid ordinary shares at \$0.046 per share
on 20 July 2004, the Company issued 42,050,000 fully paid ordinary shares at \$0.04 per share to raise \$1,682,000 for working capital
on 23 July 2004, the Company issued 7,480,547 fully paid shares to Ocean at \$0.046 per share in satisfaction of interest of \$804,105
on 23 July 2004, the Company issued 26,591,453 fully paid shares to RCF at \$0.046 per share to raise \$1,223,207 for working capital
on 6 August 2004 the Company borrowed \$1.2 million from RCF for working capital (RCF Advance). This loan is repayable by the conversion of the loan amount into fully paid St Barbara shares by 1 December 2004, either at the lowest price at which St Barbara has placed shares between 1 August 2004 and 1 December 2004 or if no shares have been placed in this period then at 80% of the average market price of St Barbara shares over the last five trading days prior to conversion, provided that RCF does not hold more than 25.6% on the conversion date. Any loan balance will remain as a loan with the right to convert later. The loan is not repayable in cash
sale of 100 million NuStar shares to third parties at \$0.04 per share
sale of livestock for \$0.5 million.

4.9 Contingent liabilities

In the 2004 annual report St Barbara identified a contingent liability relating to a claim brought against the Company by Westgold Resources NL (Westgold) in September 2000 alleging loss and damage for the sum of \$6,229,921. St Barbara has denied the allegations and the claim is being defended, having incurred costs to date in the order of \$720,000. It is possible that the Westgold litigation may not proceed to trial for a further 12 months, in which case, further legal defence costs of \$750,000 to \$1,000,000 may be incurred. The maximum liability in a worst case scenario would be approximately \$7.5 million plus interest and legal costs.

In addition to the above litigation, on 2 July 2002, Kingstream Steel Limited commenced proceedings against St Barbara and its 100% owned subsidiary, Zygot Ltd. The proceedings are at an early stage and will continue to be defended. Potential exposure to this claim including costs is estimated at less than \$200,000.

5 Profile of NuStar

5.1 Company history

NuStar was incorporated in Western Australia in 1993 under the name Taipan Resources NL (Taipan). The company listed on the ASX in November 1993. During the 2004 financial year Taipan changed its name to NuStar Mining Corporation Ltd, and changed from a public no liability company to a public company limited by shares.

52 Mining assets

NuStar's main asset is the wholly owned Paulsens deposit situated 180km west of Paraburdoo. The Paulsens project comprises two mining leases covering the identified mineral reserve and an exploration licence. The indicated and inferred resource estimate for the mine at June 2004 was 1.44 million tonnes with a head grade of 11.7 grams per tonne, containing 541,000 ounces of gold. Probable reserves total 1.2 million tonnes with a head grade of 10.7 grams per tonne. An underground mining operation will be required with development commencing in June 2004, following the announcement of a debt facility secured for the construction of a 250,000 tonne per annum treatment plant.

The Ashburton Gold Project is located 1,000km north of Perth in the north west of Western Australia and contains four exploration licences and five mining leases at Mount Clement and Metawandy Creek covering an area of $741 \text{km}^2$ .

NuStar's exploration tenements adjacent to the Paulsens project include seven exploration licences, one mining lease and a prospecting licence covering an area of 206km². The company also holds the Emily Well Group of prospecting licences near Cue in the Murchison district covering 1990ha.

53 Legal structure

NuStar has one wholly owned subsidiary, Bushsun Pty Ltd.

5.4 Capital structure and shareholders

As at the date of this report NuStar had the following securities on issue:

during the 2004 financial year NuStar issued 744 million shares. Total shares on issue at the date of this report were 989.92 million
as at the date of this report NuStar has granted 5 million options to acquire ordinary shares to NuStar's acting chief executive officer, Brett Lambert, exercisable at \$0.05 and expiring on 30 April 2009. Vesting is contingent on certain performance criteria. NuStar has also granted 2.5 million options to acquire ordinary shares exercisable at \$0.05 expiring on 30 June 2009, with no performance criteria, under an employee share scheme.

NuStar's top 20 shareholders as at 30 September 2004 are listed in the table below. It should be noted that although the Initial Sale was implemented as at 30 September 2004 the shares sold were only partly cleared prior to this date. St Barbara now owns 442 million shares or 44.7% of NuStar.

Table 7: NuStar Top 20 share register as at 30 September 2004

Shareholder	Number of Shares	% of total shares on issue
Tricom Nominees Pty Ltd (St Barbara)	462,919,338	46.76%
ANZ Nominees Ltd	105,941,000	10.70%
Equity Trustees Ltd	48,408,000	4.89%
RBC Global Services Australia Nominees Ltd	37,000,000	3.74%
Wespac Custodian Nominees	25,000,000	2.53%
Invia Custodian Ptv Ltd	8,400,000	0.85%
Nefco Nominees Pty Ltd	7,214,000	0.73%
SJA Pty Ltd	6,951,000	0.70%
Kizogo Pty Ltd	6,926,000	0.70%
Invia Custodian Pty Ltd	5,600,000	0.57%
UBS Nominees Pty Ltd	5,000,000	0.51%
Radley Investment Co Pty Ltd	5,000,000	0.51%
Miningnut Pty Ltd	4,500,000	0.45%
Millerest Pty Ltd	4,105,290	0.41%
Invia Custodian Pty Ltd	4,000,000	0.40%
Brillig Pty Ltd	4,000,000	0.40%
Beck Corporation Pty Ltd	4,000,000	0.40%
National Nominees Ltd	4,000,000	0.40%
Cartona Pty Ltd	3,000,000	0.30%
Mr William Gordon Martin & Mrs Beverley Michelle Martin	3,000,000	0.30%
Total Top 20 Shareholders	754,964,628	76.26%
Other shareholders	234,961,008	23.74%
Total	989,925,636	100%

Source: NuStar management

5.5 Share price performance

The share trading history for NuStar for the past two years is included in the table below.

Colarierent Grief	EIGNOR	LEWIGE	Las anade (S)	Volume (thousand)
30/9/2002	0.095	0.074	0.089	1,120
31/12/2002	0.094	0.06	0.085	541
31/3/2003	0.085	0.04	0.04	521
30/6/2003	0.041	0.025	0.025	290
30/9/2003	0.071	0.03	0.071	372
31/12/2003	0.088	0.052	0.054	10,067
31/3/2004	0.054	0.039	0.043	72,089
30/6/2004	0.046	0.029	0.034	111,380
30/9/2004	0.048	0.035	0.042	219,237

Table 8: NuStar quarterly share price information

Source: Bloomberg

The NuStar share price has fluctuated significantly over the past two years and since November 2003 has declined steadily. Volumes traded increased significantly after the release of the Paulsens mine drilling program. The share price at 30 September 2004 was \$0.042.

The share price and trading volumes are presented graphically in the figure below.

Figure 5: NuStar stock activity on ASX

Source: Bloomberg

The table below details the significant company news announcements related to movements in the share price and significant volumes traded in 2004. The prices at which NuStar traded prior to November 2003 are meaningless due to the extremely low volume of trades, mainly due to St Barbara's high level of shareholding at the time (approximately 88%) and the resulting illiquidity.

NETER	FERRY	Weinight M
	21/01/2004	Release of scope definition for resource extension drill programmes
2	3/03/2004	ASIC and shareholders granted approval for name and status change
3	19/03/2004	Paulsens resource extension drilling - positive results. Initial results are supportive of potential for an increase in mine life
4	30/04/2004	Release of 3rd quarter statement of cashflows. Exploration for the quarter increased by 165% over the previous 6 months
5	24/05/2004	Paulsens drilling programme completed - positive results continue
6	29/06/2004	Diamond drilling has increased the Paulsens resource by 59% to 541,300 contained ounces

Table 9: Announcements impacting share price of NuStar shares

Source: ASX Announcements

The figure below graphs the NuStar share price against the USD spot gold price

Figure 6: NuStar share price versus the USD gold price

Source: Bloomberg

NuStar's share price shows some positive correlation to movements in the gold price following the announcement of the Paulsen's mine drilling program.

5.6 Financial performance

The consolidated audited financial results of NuStar for the financial years ended 30 June 2002, 2003 and 2004 are summarised in the table below.

	Table 10: Consolidated Financial results

	\$000	\$000
П	56	407
(372)	(18, 255)	(4,577)
(16)	(44)	(4)
(388)	(18,299)	(4,581)
(905)	(1,512)	(1, 179)
(1,293)	(19, 811)	(5,760)
(110)	110
(1,403)	(19,701)	(5,760)
	\$'000

Source: NuStar Annual Reports

During the 2003 financial year NuStar recorded a write off of exploration expenditure of \$14.5 million, which had a significant effect on the underlying result compared to the 2004 financial year.

5.7 Financial position

The consolidated audited statements of financial position for NuStar as at 30 June 2002, 2003 and 2004 are where the there to help freehouse

summariscu in the table derow. Table 11: Consolidated Financial position
	Jun-02 Audited \$'000	Jun-03 Audited \$'000	Jun-04 Audited \$'000
Current assets
Cash	Ŧ	1	12,849
Receivables	341	6	1,354
Other Financial Assets		$\overline{\phantom{a}}$	188
Total current assets	342	7	14,391
Non-current assets
Restricted Cash			343
Property, plant and equipment	58	18	18
Mining Properties	14,541		1,716
Total non-current assets	14,599	18	2,077
Total assets	14,941	25	16,468
Current liabilities
Payables	12	6	797
Interest bearing liabilities	7,069	$\blacksquare$	900
Total current liabilities	7,081	6	1,697
Non-current liabilities
Interest bearing liabilities	4,876	16,848
Provisions	110
Total non-current liabilities	4,986	16,848
Total liabilities	12,067	16,854	1,697
Net assets	2,874	(16, 829)	14,771

Source: NuStar Annual Report

During the 2004 financial year, significant changes made to the affairs of the company included:

placement of 10,000,000 fully paid shares at \$0.05 per share to raise \$0.5 million (before expenses) for $\bullet$ working capital
placement of 350,000,000 fully paid shares at \$0.05 per share to raise \$17.5 million (before expenses) to fund the development of the Paulsens project
share purchase plan of up to 60,000,000 fully paid shares at \$0.05 per share in NuStar to raise up to \$3 million (before expenses) to fund the development of the Paulsens project
debt to equity swap to extinguish debt owing to St Barbara of \$17.6 million resulting in the issue to St $\bullet$ Barbara of 352,000,000 fully paid shares at \$0.05 per share in NuStar
\$1.5 million convertible note issued by NuStar to Claymore Capital Pty Ltd, convertible into $\bullet$ 30,000,000 fully paid shares at \$0.05 per share. As at 30 June 2004 only \$1 million had been drawn down and Claymore Capital Pty Ltd has converted \$100,000 thereof into 2 million fully paid NuStar shares
exploration expenditure of \$1.7 million was funded by St Barbara.

Valuation methodology 6

$6.1$ Valuation methodologies

To estimate the fair market value of the Paulsens Royalty and the fair market value of the shares in St Barbara and NuStar we have considered common market practice and the valuation methodologies recommended by ASIC Practice Note 43 regarding valuation reports of independent experts. These are discussed below.

$6.1.1$ Market based methods

Market based methods estimate a company's fair market value by considering the market price of transactions in its shares or the market value of comparable companies. Market based methods include:

capitalisation of maintainable earnings
$\bullet$ analysis of a company's recent share trading history
industry specific methods. $\bullet$

The capitalisation of maintainable earnings method estimates fair market value based on the company's future maintainable earnings and an appropriate earnings multiple. An appropriate earnings multiple is derived from market transactions involving comparable companies. The capitalisation of maintainable earnings method is appropriate where the company's earnings are relatively stable.

The most recent share trading history provides evidence of the fair market value of the shares in a company where they are publicly traded in an informed and liquid market.

Industry specific methods estimate market value using rules of thumb for a particular industry. Generally rules of thumb provide less persuasive evidence of the market value of a company than other valuation methods because they may not account for company specific factors.

6.1.2 Discounted cash flow methods

Discounted cash flow methods estimate market value by discounting a company's future cash flows to their net present value. These methods are appropriate where a projection of future cash flows can be made with a reasonable degree of confidence. Discounted cash flow methods are commonly used to value early stage companies or projects with a finite life.

6.1.3 Asset based methods

Asset based methods estimate the market value of a company's shares based on the realisable value of its identifiable net assets. Asset based methods include:

orderly realisation of assets method
liquidation of assets method $\bullet$
$\bullet$ net assets on a going concern basis.

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to shareholders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the company is wound up in an orderly manner.

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the company may not be contemplated, these methods in their strictest form may not necessarily be appropriate. The net assets on a going concern basis method estimates the market values of the net assets of a company but does not take account of realisation costs.

These asset based methods ignore the possibility that the company's value could exceed the realisable value of its assets as they ignore the value of intangible assets such as customer lists, management, supply arrangements and goodwill. Asset based methods are appropriate when companies are not profitable, a significant proportion of a company's assets are liquid, or for asset holding companies.

$6.2 -$ Selection of valuation methodologies

In selecting the appropriate valuation methodologies to assess the value of shares in St Barbara (including the Paulsens Royalty) and NuStar, we have had regard to the profile and characteristics of each company's individual assets. The principal assets of St Barbara and NuStar comprise interests in mineral exploration and mining projects, which have limited lives and where future profitability depends upon exploration activities, the outcomes of which are not predictable. We therefore do not consider it appropriate to apply the capitalisation of earnings method to either St Barbara or NuStar in determining their respective fair market values.

We consider that a valuation of the underlying assets of St Barbara and NuStar is the most appropriate valuation approach. We have also used the recent share trading history to provide evidence of the value of St Barbara and NuStar.

We engaged AMC, an independent mining specialist, to prepare a report on the value of St Barbara's and NuStar's mining and exploration assets at 30 September 2004. The valuations determined by AMC for the mining and exploration assets of St Barbara and NuStar have been adopted in our report.

In respect of the Paulsens Royalty owned by St Barbara we requested AMC to report on the projected quantity of gold that is expected to flow to the owner of the royalty over the life of the Paulsens project, to which the Paulsens Royalty relates. We then used the discounted cashflow methodology to value the Paulsens Royalty.

In respect of the remaining net assets of St Barbara and NuStar we have had regard to their book value as at 30 June 2004 and adjusted for any subsequent changes in each company's net asset position, due to capital raising, debt retirement etc.

We have relied on AMC's report which has been prepared in accordance with the Valmin Code. We have satisfied ourselves as to the independence and qualifications of AMC. The valuation methodologies adopted by AMC for the valuation of exploration assets held by St Barbara and NuStar are outlined in the AMC report at Appendix 6 and include the following:

the past expenditure method
use of actual or comparable transactions
use of values per square kilometre of exploration title $\bullet$
use of unit value per ounce of gold contained in resources.

AMC has used the discounted cashflow method to provide a technical valuation of the Paulsens project held by NuStar. We determined the gold price and exchange rate assumptions and discount rate to be applied to the cashflows.

Due to the uncertainties inherent in the valuation process. AMC has determined a range of values within which it considers each of the mining and exploration assets of St Barbara and NuStar to lie.

Valuation of Paulsens Royalty 7

Deloitte Corporate Finance has assessed the fair market value of the Paulsens Royalty to be in the range of \$4.2 million to \$5.4 million.

For the purpose of our opinion, fair market value is defined as the amount at which the asset would change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither being under a compulsion to buy or sell. We have not considered special value in this assessment, however it should be noted that a special value could be assigned to the Paulsens Royalty from the perspective of both St Barbara and NuStar.

The value of the Paulsens Royalty to St Barbara could be higher than the fair market value given that St Barbara has significant tax losses and therefore all cashflows from the Paulsens Royalty would effectively be tax free. The capital gain arising from the disposal of the Paulsens Royalty would also be tax free.

NuStar controls the underlying Paulsens project and has full access to all information regarding the project. From a NuStar perspective, it might therefore not be necessary to attribute the same level of marketability discount to the Paulsens Royalty as we have done in determining fair market value.

We have assessed the fair market value of the Paulsens Royalty using the discounted cashflow method, which requires the determination of an appropriate discount rate and the projection of future cash flows. We have applied a marketability discount to the value derived from the discounted cash flow valuation to take account of the marketability issues that impact on the ability to sell the Paulsens Royalty to a third party buyer.

We have relied on AMC's report, setting out the estimated range of gold production for the Paulsens project, as the basis of our estimated future cash flows for the Paulsens Royalty. To derive the gross royalty cashflow in AUD terms we have applied the 5% royalty rate, a real USD gold price of \$418/oz and an USD/AUD exchange rate of 0.72, equating to an AUD gold price of \$581/oz, to the gold production estimates.

We have applied a tax rate of 30% to derive the after-tax royalty cashflows and have discounted these cashflows at a rate of 9%, being the real post-tax discount rate used to value the Paulsens project held by NuStar (refer Appendix 2).

We have also considered that a buyer of the Paulsens Royalty would be entitled to a tax deduction for the capital loss arising upon expiry of the royalty. However, the ability to use this tax loss would depend upon suitable taxable capital gains being available at the time of expiry and hence the ability to derive value from the capital tax loss would vary from buyer to buyer. We have therefore incorporated the potential value of the tax losses into our estimate of the fair market value of the Paulsens Royalty as a range of values between zero and the maximum possible value, based on the maximum present value of the future tax benefit, amounting to \$0.94 million.

The marketability issues that impact on the ability to sell the Paulsens Royalty to a third party buyer include the limited pool of potential specialised buyers, the relatively small size of the asset and the limited access to detailed information on the underlying Paulsens project available to prospective buyers other than NuStar. Empirical studies of marketability discounts indicate that these can be significant, ranging from 10% to 40% depending on the circumstances. We have chosen a marketability discount of 20% to apply to the discounted cash flow value range to derive the fair market value range of the Paulsens Royalty.

Set out in the table below is a comparison of our assessment of the fair market value of the Paulsens Royalty with the cash consideration offered by NuStar.

Table 12: Assessment of fair market value for Paulsens Royalty

Estimated fair market value of Paulsens Royalty
Cash consideration offered	51	5 I

The consideration offered by NuStar is in the range of our estimate of the fair market value of the Paulsens Royalty.

Valuation of NuStar 8

For the purpose of our valuation, fair market value is defined as the amount at which the shares would change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither being under a compulsion to buy or sell. We have not considered special value in this assessment.

8.1 Net assets method

We have assessed the value of NuStar on the basis of the fair market value of its underlying net assets on a going concern basis with reference to the valuations provided by AMC and the book values of NuStar's other net assets as at 30 June 2004. NuStar's assets are summarised below, together with our range of fair market values.

Table 13: Valuation of NuStar

	Section	Book value	Valuation range
	Ref	30-Jun-04 \$'000	Low \$'000	High \$'000
Cash	8.1.1	13,192	10,000	10,000
Receivables and other assets		1.560	1,560	1,560
Capitalised mining and exploration assets	8.1.2	1,716	16,100	24,700
Total assets		16.468	27,660	32,260
Total liabilities		(1.697)	(1,697)	(1,697)
Less Capitalised corporate overheads	8.1.3		(4,500)	(4,200)
Total		14,771	21.463	30,363
Fully paid shares on issue.		989,926	989.926	989,926
Fair market value per share (cents)			2.2	3.1

8.1.1 Cash

We have included NuStar's actual cash and restricted cash as at 30 September 2004 after adding back the \$1.3 million deposit paid to St Barbara for the Paulsens Royalty. According to management, the decrease in cash since 30 June 2004 is due to expenditure on development of the Paulsens project, which has effectively been included in the valuation of mining and exploration assets discussed below.

All other assets and liabilities have been included at the audited book values as at 30 June 2004.

8.1.2 Valuation of mining and exploration assets

NuStar's mineral assets include interests in:

the Paulsens project in the Ashburton region of Western Australia
exploration properties in the Ashburton region of Western Australia
$\bullet$ an exploration property in the Cue region of Western Australia.

In preparing the discounted cashflow model for the valuation of the Paulsens project, AMC has utilised the life of mine model provided by NuStar's management. The cost of the gross production payable to the owner of the Paulsens Royalty has been included in the cashflows determined by AMC. We have provided the gold price, exchange rate and discount rate assumptions for use in AMC's model.

We have estimated a real post-tax discount rate for NuStar of 9% (refer Appendix 2). The spot gold price as at 30 September 2004 of US\$418/oz has been used as a proxy for the future gold price and the spot exchange rate at the same date of 0.72 has been used as a proxy for the future exchange rate, resulting in an AUD gold price of \$581/oz. A recent IBIS Report on the gold industry indicates that the AUD gold price is expected to remain at similar levels for the current financial year and thereafter to decrease marginally.

The values determined by AMC are summarised in the table below:

		Table 14: Mineral asset valuation assessed by AMC

Project	Low \$'000	High \$'000	Preferred \$'000
Paulsens project	9.100	17.100	14,600
Exploration portfolio	1,200	1,700	1,400
Total	10,300	18,800	16,000

Source: AMC mineral specialist report

The value determined by AMC is based on post tax cashflows using a notional tax rate of 30%. It is therefore necessary to also consider the net present value of NuStar's future income tax benefit. Based on NuStar's 2004 annual report, the future income tax benefit potentially available is \$7.0 million. The net present value of the future income tax benefit, with reference to the projected net income from the Paulsens project and using the discount rate of 9%, has been assessed to be in the range of \$5.8 million to \$5.9 million. While it would generally be appropriate to use a slightly higher discount rate to value a future income tax benefit, given the risks inherent in the utilisation of the tax losses, we do not believe these risks to be large in NuStar's case as it is anticipated that the losses will be used within a short time frame.

The total value of the mining and exploration assets of NuStar is therefore in the range of \$16.1 million to \$24.7 million.

8.1.3 Capitalised corporate overheads

No amount has been included in AMC's valuation of NuStar for corporate overheads incurred by NuStar in relation to managing its business and maintaining its head office and its status as a listed company. Management has advised that corporate overhead costs would reasonably range between \$1.4 million and \$1.7 million per annum. We have discounted these costs after tax over the life of the Paulsens project and have accordingly estimated this cost in the range of \$4.2 million to \$4.5 million.

Analysis of recent share market trading $8.2₁$

An analysis of a company's recent share trading history can give an indication of a company's fair market value, on a portfolio holding basis.

Over the past three months, NuStar has traded between 3.6 cents and 4.6 cents. Recently St Barbara has sold down 100 million NuStar shares within this range.

Stock market values can differ from technical values due to the effect of market sentiment and investor speculation. In particular, investors in small exploration stocks tend to be less risk adverse than the risk profile adopted in our valuation and hence such investors may value shares above their technical values.

8.3 Number of shares on issue

We have not adjusted the number of shares on issue to take account of the dilutive effect of options, mainly because the number of options outstanding is not significant.

Summary of valuation methods and conclusion 8.4

The valuation of NuStar derived from the net assets method, using the analysis of recent share trading as a cross check, is summarised in the following table.

Table 15: Valuation of NuStar before Proposed Sale

Net assets method value per share
Analysis of recent share trading over past three months

Valuation of St Barbara 9

For the purpose of our opinion fair market value is defined as the amount at which the shares would change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither being under a compulsion to buy or sell. We have not considered special value in this assessment.

9.1 Net assets method

We have assessed the value of St Barbara on the basis of the fair market value of the Company's underlying net assets on a going concern basis with reference to the valuations provided by AMC, the valuation of the Paulsens Royalty and the book values of St Barbara's other net assets as at 30 June 2004. St Barbara's assets are summarised below, together with our range of fair market values.

		Book value 30-Jun-04	Valuation range
	Ref	\$'000	\$'000	\$'000
Cash	9.1.1
Restricted cash		2,765	2,765	2,765
Receivables	9.1.1	158	4,158	4,158
Investment in NuStar	9.1.2	21,888	9,600	13,600
Inventories		777	777	777
Assets held for resale		58	$\overline{\phantom{a}}$
Property, plant & equipment	9.1.3	4,929	3.359	3,859
Other		630	630	630
Paulsens Royalty	9.1.4	3,695	5,100	5,100
Capitalised mining and exploration assets	9.1.5	36,990	11,380	15,900
Total assets		71,891	37,770	46,790
Total liabilities	9.1.6	(19.921)	(14,703)	(14,703)
Less corporate overheads	9.1.7	٠	(6,100)	(6,100)
Total		51,970	16,967	25,987
Fully paid shares on issue (including conversion of RCF Advance)	9.3	574,149	745,271	745,271
Fair market value per share (cents)			2.3	3.5

Table 16: Valuation of St Barbara

9.1.1 Cash and Receivables

The \$1.3 million cash received as a deposit in respect of the Proposed Sale has not been included in cash as we have included the Paulsens Royalty at the value of the consideration of \$5.1 million. The deposit for the sale of the Pelican Joint Venture and the balance of funds receivable have not been included, as the value of the Pelican Joint Venture is included in the valuation of the mining and exploration assets (refer Section 9.1.5).

Although St Barbara raised cash though several issues of shares following 30 June 2004, (refer Section 4.8) management has advised us that the cash has been used for operating activities and is no longer on hand.

We have included the \$4.0 million receivable in respect of the Initial Sale in our assessment of the fair market value of St Barbara.

9.1.2 Investment in NuStar

St Barbara's investment in NuStar has been valued at the fair market value per share assessed in Section 8.4. This does not take into account the current share trading price.

Table 17: Investment in Nustar

	Low ¹	High ¹
Shares held in NuStar	442 million	442 million
Value of NuStar per share (cents)	2.2	3.1
Value of holding in NuStar (\$)	9.6 million	13.6 million

Note1: Differences arise due to rounding

9.1.3 Property plant and equipment

The processing plant and equipment owned by St Barbara located at the Bluebird mine has been considered in AMC's valuation report. The processing plant is currently under care and maintenance following the closure of the mine. St Barbara is currently negotiating for the plant to be leased to the new owner of the Burnakurra project for the treatment of ore, which will alleviate the costs of care and maintenance currently being incurred.

The current book value of the plant, incorporating all associated plant and equipment is \$3.88 million. The St Barbara Board has valued it, on a gross replacement cost basis, at \$50 million, however, as the plant is not planned to be fully utilised in the near future, we do not believe that it is appropriate to value the Bluebird plant at its depreciated replacement value.

A similar sized plant recently sold for \$2.75 million and AMC has suggested that a reasonable salvage value range for the Bluebird plant would be between \$2.25 million and \$2.75 million. We have included it in this range.

The pastoral leases owned by St Barbara in relation to three stations in the Meekatharra region have been included at the audited book value of \$1.109 million.

9.1.4 Paulsens Royalty

We have included the Paulsens Royalty at the agreed sale price of \$5.1 million in our assessment of the fair market value of St Barbara.

9.1.5 Valuation of mining and exploration assets

St Barbara's mineral assets include interests in:

ore reserves, mineral resources and exploration potential within tenements in the Meekatharra region, mainly between Meekatharra in the north and the Reedy's area in the south
a number of exploration tenements, mainly in the Yilgarn region of Western Australia.

The values estimated by AMC are summarised in the table below:

Table 18: Mineral asset valuation assessed by AMC

Project	Low \$~m	High S _m	Preferred \$'m
Exploration valuation
- Meekatharra tenements/interests	11.10	15.40	13.20
- non Meekatharra tenements/interests	0.28	0.50	0.39
Total	11.38	15.90	13.59

Source: AMC mineral specialist report

9.1.6 Liabilities

In determining St Barbara's liabilities we have taken into account the conversion by Ocean of the face value of its convertible note of \$4.4 million into 55 million ordinary shares at \$0.08, along with the issue of further shares in satisfaction of interest outstanding on the loan (refer Section 4.8). This therefore reduces St Barbara's liabilities by \$5.24 million compared to the 30 June 2004 position.

We have also included an additional liability of \$26,000 payable to Claymore Capital Pty Ltd in the liability position as at 30 September 2004.

9.1.7 Corporate overheads

No amount has been included in AMC's valuation for St Barbara's corporate overheads incurred in relation to managing its business and maintaining its head office and its status as a listed company. Based on management's forecasts, we have assumed that corporate overhead costs will be \$3.5 million per annum. However, we do not believe that St Barbara's Board would continue to incur such costs indefinitely. We have therefore included only 21 months of corporate overheads, discounted over the period, as a reduction in our assessment of St Barbara's fair market value.

9.1.8 Tax losses

The potential future income tax benefit of St Barbara's tax losses as at 30 June 2004 is \$33.5 million. No value has been attributed to these tax losses, as no profits are expected to be earned by the Company in the foreseeable future.

9.1.9 Contingent liabilities

As discussed in Section 4.9, St Barbara has identified contingent liabilities with respect to claims brought against it by Westgold and Kingstream Steel Limited in its 2004 annual report.

Based on management's decision to defend these claims, we have not included any liability for these claims. Expected legal costs of \$200,000 have been included in the corporate overheads.

9.2 Analysis of recent share market trading and share placements

An analysis of a company's recent share trading history can give an indication of a company's fair market value, on a portfolio holding basis. Over the past three months, St Barbara has traded between 4.2 cents and 5.9 cents.

We have also considered the share placements made to significant shareholders in July 2004 at 4.0 cents and 4.6 cents per share which supports recent share trading figures.

9.3 Number of shares on issue

We have adjusted the number of shares on issue to take account of the conversion of the RCF Advance by 1 December 2004 or on such later date as may be requested by RCF. We have assumed a conversion price of 4.0 cents per share, being 80% of the St Barbara share price as at 18 October 2004, resulting in an increase in the effective number of fully paid shares on issue of 30 million shares.

We have not adjusted the number of shares on issue to take account of the dilutive effect of options, mainly because the number of options outstanding is not significant.

9.4 Summary of valuation methods and conclusion

The valuation of St Barbara derived from the net assets method, using the analysis of recent share trading as a cross check is summarised in the following table.

Table 19: Valuation of St Barbara

	Section Ref	Low value cents	High value cents
Net assets method value per share	91	7 R	3.5
Analysis of recent share trading over past three months	9.2	4.2	5.9.

Evaluation 10

10.1 Evaluation of Proposed Sale

In forming our opinion as to whether the Proposed Sale is fair and reasonable we have considered all the circumstances of the Proposed Sale including a comparison of the likely advantages and disadvantages to Shareholders if the Proposed Sale does or does not proceed. We have also considered whether the advantages outweigh the disadvantages.

Advantages

The likely advantages to Shareholders if the Proposed Sale is approved are:

The consideration offered by NuStar is fair

We have estimated the fair market value of the Paulsens Royalty using the discounted cash flow method, together with an appropriate adjustment for the lack of marketability of the asset.

Set out in the table below is a comparison of our assessment of the fair market value of the Paulsens Royalty with the cash consideration offered by NuStar.

TOMIO EDI TWODODINGIN OTTOR RIGHNOL TONOO IOI I GONOONID INCTONT


a ang pangagawang pangagawang pangagawang pangagawang pangagawang pangagawang
Estimated fair market value of Paulsens Royalty (Section 7)
Cash consideration offered

Table 20: Assessment of fair market value for Paulsans Royalty

The consideration offered by NuStar is within the range of our estimate of the fair market value of the Paulsens Royalty.

The Proposed Sale, in conjunction with the Share Buy-back, is part of the Board's strategy to re-position St Barbara

The Proposed Sale will provide St Barbara with the financial means to recommence its exploration activities and pursue other acquisition and joint venture opportunities

Limited opportunities for sale of the Paulsens Royalty

Prior to the conclusion of the agreement with NuStar, St Barbara's Board was undertaking a tender sale process in respect of the Paulsens Royalty. Although this process did not run to conclusion, it yielded an offer substantially below the \$5.1 million disposal price and highlighted significant issues surrounding the marketability of the Paulsens Royalty. These issues included the fact that there is only a small pool of specialised buyers for such an asset and for most of these prospective buyers the Paulsens Royalty is too small. In addition, there is limited detailed information available to a prospective buyer about the underlying Paulsens project.

Disadvantage

The likely disadvantage to Shareholders if the Proposed Sale is approved is:

The sale of the Paulsens Royalty means that the Company will no longer have the prospect of a regular cash inflow beginning in 2005

Implications if the Proposed Sale is not approved

If the Proposed Sale is not approved by Shareholders, St Barbara will have to find alternative sources of short term funding in order to pursue exploration activities and to fund working capital.

Conclusion

In our opinion, the Proposed Sale is fair and reasonable to Shareholders.

10.2 Evaluation of Share Buy-back

The fair market value of a St Barbara share has been estimated using the net assets method on a going concern basis incorporating the value of mining assets as estimated by AMC. The fair market value of a St Barbara share is estimated to be in the range of 2.3 cents to 3.5 cents. We have also referred to the share trading history of St Barbara shares over the past three months, which is in the range of 4.2 cents to 5.9 cents.

The fair market value of a NuStar share has been estimated using the net assets method on a going concern basis incorporating the value of mining assets as estimated by AMC. The fair market value of a NuStar share is estimated to be in the range of 2.2 cents to 3.1 cents. We have also referred to the share trading history of NuStar shares over the past three months, which is in the range of 3.6 cents to 4.6 cents.

The comparison of the estimated fair market values using the net assets method yields a Fair Market Value Ratio of 1.05 to 1.14 NuStar shares for every St Barbara share. The comparison of the recent share trading prices results in a Trading Price Ratio of 1.17 to 1.28 NuStar shares for every St Barbara share. These ratios can be compared to the Share Buy-back Ratio of 1.25 NuStar shares for every St Barbara share.

The above results are summarised in the table below.

Table 21: Comparison of estimated fair market values and share trading values of a St Barbara and a NuStar Share
	E ROMA teents!	En 18 teents!
Estimated fair market value of a St Barbara share (Section 9)	2.3	3.5
Estimated fair market value of a NuStar share (Section 8)	2.2	3.1
Fair Market Value Ratio	1.05	1.14
Recent share trading price of a St Barbara share (Section 9.4)	4.2	5.9
Recent share trading price of a NuStar share (Section 8.4)	3.6	4.6
Trading Price Ratio	1.17	1.28
Share Buy-back Ratio	1.25	1.25

Depending on individual Shareholder circumstances there are potential taxation consequences of accepting the Share Buy-back. Shareholders should seek their own independent advice in this regard.

Appendix 1: Glossary

Reference	Definition
AFSL	Australian Financial Services Licence
AGSM	Australian Graduate School of Management
AIM	Alternative Investment Market of the London Stock Exchange
AMC	AMC Consultants Pty Ltd
ASIC	Australian Securities and Investment Commission
ASX	Australian Stock Exchange Limited
AUD	Australian dollar
Aurex	Aurex Consolidated Ltd
Aurogenic	Aurogenic Resources Pty Ltd
AUS	Australian Auditing Standards
AusIMM	Australian Institute of Mining and Metallurgy
bps	Basis points
CAPM	Capital Asset Pricing Model
Deloitte Corporate Finance	Deloitte Corporate Finance Pty Limited
EBIT	Earnings before interest and tax
EBITDA	Earnings before interest, tax, depreciation and amortisation
Elara	Elara Mining Ltd
EMRP	Equity Market Risk Premium
Fair Market Value Ratio	The ratio of the fair market value of a NuStar share to the fair market value of a St Barbara share
FSG	Financial Services Guide
IBIS	IBISWorld Pty Ltd
IBIS Report	IBIS report entitled Gold Ore Mining in Australia published 1 October 2004
Independence	Independence Gold NL
Initial Sale	Sale of 100 million NuStar shares
NPAT	Net profit after tax
NuStar	NuStar Mining Corporation Limited
Ocean	Ocean Resource Capital Holdings Plc
Option	The grant of an option to Claymore Capital Pty Ltd (or its nominees) to purchase 100 million NuStar shares at \$0.05 per share at any time up to 15 May 2005
Other Shareholders	Shareholders other than RCF, Strata, Ocean and Toto
Paulsens Royalty	5% royalty in respect of the Paulsens project
Proposed Sale	Proposed sale of the Paulsens Royalty for \$5.1 million to NuStar
RCF	Resource Capital Fund II LP

Reference	Definition
RCF Advance	\$1.2 million borrowed by the Company on 6 August 2004 from RCF for working capital
Share Buy-back	Pro-rata share buy-back of up to 192 million St Barbara shares to be effected through a share swap of up to 240 million share in NuStar on the basis of 1.25 NuStar shares for every St Barbara share
Share Buy-back Ratio	The offered ratio of 1.25 NuStar shares for every St Barbara share
Shareholders	Existing holders of St Barbara's ordinary shares
St Barbara or the Company	St Barbara Mines Limited
Strata	Strata Mining Corporation Ltd
Taipan	Taipan Resources NL
the Board	The board of directors of St Barbara
the Transactions	The transactions announced by St Barbara on 20 September 2004
the Valmin Code	AusIMM Code and Guidelines for Technical Assessment and/or Valuation of Mineral and Petroleum Assets and Mineral and Petroleum Securities for Independent Expert Reports
Toto	Toto Capital Inc
Trading Price Ratio	The ratio of the market price of a NuStar share to the market price of a St Barbara share
USD	United States dollar
WACC	Weighted average cost of capital
Westgold	Westgold Resources NL

Appendix 2: Discount rate

The discount rate used to equate the future cash flows to their present value reflects the risk adjusted rate of return demanded by a hypothetical investor. Discount rates are determined based on the cost of an entity's debt and equity weighted by the proportion of debt and equity used. This is commonly referred to as weighted average cost of capital (WACC). The post tax WACC can be derived using the following formula:

$$
WACC = \left(\frac{E}{V} * K_e\right) + \left(\frac{D}{V} * K_d \left(1 - t_c\right)\right)
$$

The components of the formula are:

K,		cost of equity capital
$K_{\rm d}$		cost of debt
Ť,		corporate tax rate
E/V	$=$	proportion of company funded by equity
D/V		proportion of company funded by debt
		. .

The adjustment of $K_d$ by $(1-t_c)$ reflects the tax deductibility of interest payments on debt funding. The corporate tax rate has been assumed to be 30%.

Cost of equity capital (K_a)

The $K_e$ is the rate of return that investors require to make an equity investment in a firm.

We have used the Capital Asset Pricing Model (CAPM) to estimate the $K_e$ for NuStar. CAPM calculates the minimum rate of return that the company must earn on the equity-financed portion of its capital to leave the market price of its shares unchanged. The CAPM is the most widely accepted and used methodology for determining the cost of equity capital.

Under the "classical" system of double taxation of dividends which existed in Australia until the introduction of dividend imputation in 1987 (and which still applies in many countries), the cost of equity capital under CAPM is determined using the following formula:

$K_{\ell} = R_{\ell} + \beta(R_{\ell} R_{\ell}) + a$

The components of the formula are:

K, $=$ required return on equity

$\overline{R}_{\ell}$ the risk free rate of return $=$

$R_m$ the expected return on the market portfolio

$\beta$ beta, the systematic risk of a stock which can be objectively measured by the responsiveness of company returns to movements in returns earned on the market portfolio

specific company risk premium $\alpha$

Each of the components in the above equation is discussed below.

Risk free rate $(R_i)$

The risk free rate compensates the investor for the time value of money and the expected inflation rate over the investment period. The frequently adopted proxy for the risk free rate is the long-term government bond rate.

In determining $R_f$ we have taken the 10-year Australian Government Bond yield on 30 September 2004 of 5.48%. The 10-year bond rate is a widely used and accepted benchmark for the risk free rate. This rate represents a nominal rate and thus includes inflation.

Equity market risk premium (EMRP)

The Equity Market Risk Premium (EMRP) $(R_m - R_t)$ represents the risk associated with holding a market portfolio of investments, that is, the difference between the expected return on holding the market portfolio and the risk free rate. It is the excess return above the risk free rate that investors demand for their increased exposure to risk when investing in equity securities.

In selecting an appropriate EMRP to include in the estimation of the cost of equity a number of factors need to be considered:

whether to use historical or prospective measures
the use of arithmetic or geometric averaging for historical data
selection of an appropriate benchmark risk free rate
the impact of franking tax credits
time periods for use in historical analysis
exclusion or inclusion of extreme observations

Historical and prospective EMRP

In evaluating the EMRP, we have considered both the historically observed and the prospective EMRP. The most appropriate EMRP to use in our analysis is the prospective risk premium that investors are using to evaluate current investment opportunities. However, while being theoretically preferable, it is not possible to reliably measure prospective EMRP.

The historically observed EMRP is typically used as a proxy for the prospective EMRP. The historical EMRP is estimated by comparing the historical returns on equities against the returns on risk free assets such as Government bonds. The historical EMRP has the benefit of being capable of estimation from reliable data; however it is possible that historical returns achieved on stocks were different from those that were expected by investors when making investment decisions in the past and thus the use of historical market returns to estimate the EMRP would be inappropriate.

We have used the historically observed EMRP as a guideline in determining the appropriate EMRP to use in this report. In particular, we have considered a recent study undertaken by the Centre for Research in Finance at the Australian Graduate School of Management (AGSM) which gives detailed estimates of the EMRP for investors in Australian listed equity, calculated using data from January 1974 to December 2002.

Arithmetic or geometric averaging of historical returns

Empirical studies seeking to measure the historical EMRP typically average the results using either an arithmetic or geometric averaging process. Geometric averaging assumes that returns are reinvested in later periods and will be less than the arithmetic average if the returns show some variance between periods.

We consider the arithmetic average equity risk premium to be more appropriate when discounting future cash flows. The geometric average is more appropriate when reporting past performance, since it represents the compound average return, but we believe that investors today would demand a higher premium than that calculated using a geometric average.

Risk free rate used in the analysis of historical returns

Risk free securities of different maturities can be used to measure the historical EMRP. For example, the AGSM reports the EMRP calculated over both 13 week Government notes and 10 year Government bonds. To match the risk free rate included in the CAPM and discussed above, we have considered the premium calculated over the return on 10 year Government bonds.

Franking tax credits

The return on the market portfolio used in calculating the EMRP may include a return that shareholders receive through franking tax credits. The evidence on franking tax credits is inconclusive and therefore we have not adjusted the cost of capital for the impact of dividend imputation. However, for illustrative purposes in Table 21 below, we present the EMRP both excluding and including the impact of franking tax credits to illustrate the range of values for the EMRP that the market may be demanding. The AGSM estimated that the inclusion of franking tax credits increased the historically observed EMRP by approximately 75 basis points (bps), based on short-maturity risk free assets. As we have used the EMRP calculated over longer term securities, we have assumed the same estimated increase of 75 bps to determine the illustrative EMRP including franking tax credits.

Time period for observations

In empirical studies seeking to measure the EMRP, it is necessary to select a time period over which observations are considered. In general a longer time period is preferred as a larger number of observations are available which narrows the confidence intervals for the observed EMRP. However, it is possible that the EMRP does not remain stable over time and therefore a shorter observation period could be used to incorporate the recent observed risk premium only.

As noted above, we have used the results calculated using data from January 1974 as this is the longest period covered in the AGSM survey and data from a shorter period would be less reliable.

Extreme observations - October 1987

Some observers consider that the severe market movement in October 1987 (and shown in the graph of the ASX 100 Accumulation Index below) was an extreme observation, which is unlikely to repeat itself.

Source: Bloomberg

A large fall in value, such as in October 1987, will decrease the returns to equity holders and therefore the EMRP. Accordingly, ignoring this observation tends to increase the historically observed EMRP by approximately 1.4% based on the AGSM study.

On balance, we favour the inclusion of October 1987 within the observations as it appears that this movement merely returned the market to its longer term trend. However, in Table 1 below we present both scenarios, as wider market participants may have more diverse views.

Estimates of the EMRP

The recent study undertaken by the Centre for Research in Finance at the AGSM detailed the estimates for the EMRP, calculated using arithmetic averaging of returns between 1974 and 2002, as set out in Table 22 below.

Table 22: Equity market risk premium

With franking tax credits	5. R.O	5.41
With no franking tax credits	6.14

Source: AGSM Risk Management Service

We have adopted 6% as the EMRP. This EMRP is consistent with other studies in developed markets. In particular, Roger Ibbotson and Peng Chen, of Ibbotson Associates and the Yale School of Management respectively, estimated the expected long-term equity risk premium in the US (relative to the long-term government bond yield) to be about 6% arithmetically and 4% geometrically (Financial Analysis Journal, Vol. 59, No.1, February 2003).

Beta estimate $(\beta)$

The beta coefficient measures the systematic risk of a company in comparison to the market as a whole. A beta of greater than one indicates greater market related risk than average, while a beta of less than one indicates less risk than average. The betas of various Australian industries listed on the ASX are reproduced below.

Figure 8: Betas for various Industries (As at December 2003)

Source: AGSM Risk Management Service

The differences are related to the business risks associated with the industry. For example, the above diagram indicates the media industry is riskier than the utilities industry. The beta for an asset can be estimated by regressing the returns on any asset against returns on an index representing the market portfolio, over a reasonable time period.

In estimating an appropriate beta for NuStar we have considered the betas of listed companies that are comparable to NuStar. These betas, which are presented below, have been calculated based on weekly returns, over a two year period, compared to the All Ordinaries index.

Company Name	Enterprise value San	Levered Beta	Unlevered Bar
Bendigo Mining Ltd	165.77	0.66	0.66
Ballarat Goldfields	74.37	0.59	0.59
Croesus Mining NL	162.66	0.97	0.97
Dioro Exploration NL	32.47	0.50	0.49
Equigold NL	232.71	0.81	0.78
Sedimentary Holdings Ltd	56.95	1.73	1.73
Batavia Mining Ltd	8.81	0.63	0.52
Rand Mining NL	5.89	1.04	1.04
Agincourt Resources Ltd	112.88	0.56	0.56
SMC Gold Ltd	24.66	1.51	1.21
Average		0.90	0.85

Table 23: Analysis of Betas for listed companies with comparable operations to NuStar

Source: Bloomberg, observed weekly over a two year period to 30 September 2004

The observed beta is a function of the underlying risk of the cash flows of the company, together with the capital structure and tax position of that company. This is described as the levered beta.

The capital structure and tax position of the entities in the table above may not be the same as NuStar. The levered beta is often adjusted for the effect of the capital structure and tax position. This adjusted beta is referred to as the unlevered beta. The unlevered beta is a reflection of the underlying risk of the pre-financing cash flows of the entity.

In selecting an appropriate beta for NuStar we have considered the following:

the average unlevered beta for the companies that are comparable to NuStar is 0.85 and the average levered beta is 0.90
NuStar's own levered beta for the same observation period was 1.27

Taking into consideration the relevered beta for the comparable companies and NuStar's own levered beta we have selected a levered beta of 1 for NuStar.

Conclusion on cost of equity

Based on the above factors we arrive at a Ke as follows:

Table 24: Ke applied to valuation of NuStar

Risk free rate $(\%)$	5.48%
EMRP $(% )$	6.00%
Beta	1.0
Cost of equity capital $(K_e)$	,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 11.5% ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Cost of debt capital $(K_d)$

We have calculated NuStar's post tax cost of debt to be 9.4% on a post-tax basis. This is NuStar's actual weighted cost of debt for the 2004 financial year.

Calculation of WACC

Based on the above, we have assessed the nominal post-tax WACC for NuStar to be:

Table 25: WACC applied to valuation of NuStar

Cost of equity capital	11.5%
Cost of debt capital	9.4%
Debt to enterprise value ratio	5.0%
Weighted average cost of capital	,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 11 4% ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

As AMC has performed their modelling in real, not nominal terms, it is necessary to convert the nominal post tax WACC calculated above to real terms.

This calculation is calculation is carried out according to the Fisher equation, using following formula:

$$
k = (1 + r)/(1 + i) - 1
$$

where:

is the real WACC, to be used in discounting real cash flows; $\bf k$

is the nominal WACC, calculated as above; and $\dot{\Gamma}$

i is the expected inflation rate over the period modelled.

Applying the Fisher equation assuming an inflation rate of 2.5%, results in a real post-tax WACC of 8.6%. We have therefore selected a real post-tax WACC of 9% for NuStar.

Appendix 3: Comparable entities

Bendigo Mining Limited is a gold exploration and production company. The company's primary project is located near Bendigo, Victoria.

Ballarat Goldfields NL mines and explores for precious minerals, mainly gold, throughout Victoria. The company's exploration activities encompass joint ventures which include the Ballarat Gold Project.

Croesus Mining NL explores and produces gold and base metals throughout Western Australia. The company has interests in gold prospects in the Kalgoorlie Region and includes the Binduli, Davyhurst and Kalgoorlie South projects.

Dioro Exploration NL is a gold exploration and development company with operations in Western Australia. The company's projects include Frog's Leg and Winston Churchill.

Equigold NL is a gold exploration and mining company operating projects in Western Australia and Cote d'Ivoire. The company's exploration projects include Mt Rawdon, Bonikro and Kirkalocka.

Sedimentary Holdings Limited explores for and produces gold in Queensland. The company operates primarily through the Cracow Joint Venture with exploration activities at Crown Shoot, Klondyke North and Golden Plateau.

Batavia Mining Limited explores for and produces gold and other minerals principally in Western Australia. The company's projects are located at Gullewa and Paynes Find in the Murchison province of Western Australia.

Rand Mining NL explores for and produces gold through its exploration projects in Western Australia. The company's main projects are East Kundana and Seven Mile Hill.

Agincourt Resources Limited is a gold mining exploration company whose primary project is the Wiluna Gold Mine in Western Australia.

SMC Gold Limited is a gold exploration and mining company. The company's gold projects include the Hadleigh Castle and Far Fanning near Charters Tower and the Cinabrio copper mine in Chile.

Appendix 4: Sources of information

In preparing this report we have had access to the following principal sources of information:

St Barbara Annual Reports for the years ended 30 June 2002, 2003 and 2004
NuStar Annual Reports for the years ended 30 June 2002, 2003 and 2004 $\bullet$
Publicly Available Information $\bullet$
Draft explanatory memorandum prepared by St Barbara $\bullet$
Discussions with directors and management of NuStar and St Barbara $\bullet$
IBISWorld Pty Ltd "Gold ore mining in Australia" report published 1 October 2004 $\bullet$
Projected production schedule for the Paulsens project $\bullet$
Top 20 shareholder lists for St Barbara and NuStar as at 30 September 2004 $\bullet$
ASX announcements and media releases concerning the Transactions $\bullet$

We have also placed significant reliance on the independent mineral specialist report prepared by AMC.

Appendix 5: Qualifications, declarations and consents

The report has been prepared at the request of the Directors of St Barbara and is to accompany the Explanatory Memorandum and Notice of Meeting to be sent to St Barbara's shareholders to convene a meeting of shareholders on or about 29 November 2004. Accordingly, it has been prepared only for the benefit of the shareholders in their assessment of the Proposed Sale and Share Buy-back outlined in the report and should not be used for any other purpose. Further, recipients of this report should be aware that it has been prepared without taking account of their individual objectives, financial situation or needs. Accordingly, each recipient should consider these factors before acting on the Proposed Sale and Share Buy-back.

The report represents solely the expression by Deloitte Corporate Finance of its opinion as to whether the Proposed Sale is fair and reasonable in relation to the sale of the Paulsens Royalty and its evaluation of the Share Buy-back. Deloitte Corporate Finance consents to this report being included in the Notice of Meeting and Explanatory Memorandum to be sent to Shareholders.

Statements and opinions contained in this report are given in good faith but, in the preparation of this report, Deloitte has relied upon the information provided by the directors and executives of St Barbara which Deloitte believes, on reasonable grounds, to be reliable, complete and not misleading. Deloitte does not imply, nor should it be construed, that it has carried out any form of audit or verification on the information and records supplied to us. Drafts of our report were issued to St Barbara management for confirmation of factual accuracy.

To the extent that this report refers to prospective financial information we have considered the prospective financial information and the basis of the underlying assumptions. Our procedures are limited primarily to inquiries of company personnel and analytical procedures applied to the financial data. In accordance with the various professional standards and guidance pursuant to which this report has been prepared, as set out in Section 2, we do not express any opinion on any financial data or other information referred to in this report.

Actual results are likely to be different from the projections referred to in this report since anticipated events frequently do not occur as expected and the variation may be material. The achievement of projections is dependent on the outcome of the assumptions. Accordingly, we express no opinion as to whether the forecasts will be achieved.

Deloitte Corporate Finance also relies on the valuation report prepared by AMC. Deloitte Corporate Finance has received consent from AMC to rely on its report in the preparation of this report.

Furthermore, recognising that Deloitte Corporate Finance may rely on information provided by St Barbara and its officers and/or associates, St Barbara has agreed to make no claim against Deloitte Corporate Finance to recover any loss or damage which St Barbara may suffer as a result of that reliance and also has agreed to indemnify Deloitte Corporate Finance against any claim arising out of the assignment to give this report, except where the claim has arisen as a result of any proven wilful misconduct by Deloitte Corporate Finance.

Deloitte Corporate Finance holds the appropriate Australian Financial Services licence to issue this report and is owned by the Australian Partnership Deloitte Touche Tohmatsu. The employees of Deloitte Corporate Finance principally involved in the preparation of this report were Tom Henderson, Stephen Reid and Nicki Ivory. Tom Henderson and Stephen Reid are Directors, and Nicki Ivory is an Associate Director, of Deloitte Corporate Finance. Each have many years experience in the provision of corporate financial advice, including specific advice on valuations, mergers and acquisitions, as well as the preparation of expert reports.

Neither Deloitte Corporate Finance, DTT, nor any partner or executive or employee thereof has any financial interest in the outcome of the proposed transaction which could be considered to affect our ability to render an unbiased opinion in this report. Deloitte Corporate Finance will receive a fee of \$61,800 exclusive of GST in relation to the preparation of this report. This fee is based upon time spent at our normal hourly rates and is not contingent upon the success or otherwise of the Proposed Sale and Share Buy-back.

Appendix 6: AMC specialist valuation report

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, and their respective subsidiaries and affiliates. Deloitte Touche Tohmatsu is an organization of member firms around the world devoted to excellence in providing professional services and advice, focused on client service through a global strategy executed locally in nearly 150 countries. With access to the deep intellectual capital of 120,000 people worldwide, Deloitte delivers services in four professional areas—audit, tax, consulting and financial advisory services—and serves more than one-half of the world's largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies. Services are not provided by the Deloitte Touche Tohmatsu Verein, and, for regulatory and other reasons, certain member firms do not provide services in all four professional areas.

As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other's acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names "Deloitte", "Deloitte & Touche", "Deloitte Touche Tohmatsu", or other related names.

AMC Consultants Pty Ltd

ABN 58 008 129 164

9 Havelock Street WEST PERTH WA 6005

Telephone +61 8 9481 6611 Facsimile +61 8 9481 6622 [email protected] www.amcconsultants.com.au

DELOITTE CORPORATE FINANCE PTY LTD

ST BARBARA - NUSTAR TECHNICAL VALUATION

AMC 204075 October 2004

EXECUTIVE SUMMARY

AMC Consultants Pty Limited ("AMC") has been requested by Deloitte Corporate Finance Pty Limited ("Deloitte") to undertake an independent assessment of the Technical Value of the mining and exploration assets of St Barbara Mines Limited ("SBM") and NuStar Mining Corporation Limited ("NuStar"), including the 5% royalty held by SBM in respect of the Paulsens Project ("Paulsens Royalty"). Deloitte has been appointed by the directors of SBM. The assessment is to form part of the independent expert's report to be prepared by Deloitte in relation to the following transactions proposed by SBM:

the disposal of the Paulsens Royalty to NuStar, a 54% held subsidiary of SBM, for \$5.1M
the pro-rata buy-back of up to 192M SBM shares in exchange for up to 240M NuStar shares.

SBM's mineral assets include interests in:

ore reserves, mineral resources and exploration potential within tenements in the Meekatharra region, mainly between Meekatharra in the north and the previously Reedys area in the south
a number of other exploration tenements, mainly in the Yilgarn region of Western Australia.

NuStar's mineral assets include interests in:

the Paulsens Project in the Ashburton region of Western Australia
exploration properties in the Ashburton region
an exploration property in the Cue region of Western Australia

Values determined in this report are effective as at 30 September 2004.

In previous valuations of SBM, AMC has estimated an "Operational Value" after projecting a life of mine model, based both on the existing resources and reasonably quantifiable potential extensions thereof and an "Exploration Value" for the remaining mineral assets. As the Meekatharra operation is currently on care and maintenance and there is no existing production plan or potential plan which, in AMC's opinion, can be reasonably defined, the values for SBM presented in this report are "Exploration Values".

Classifications of SBM resources, where reviewed, are reasonable in terms of confidence levels, which can be attributed to the density and quality of data. All estimates have been prepared by Competent Persons as defined by the JORC Code. The resource estimates are accepted by AMC as being reported in accordance with the JORC Code although it has reservations as to the adequacy of economic limits placed on some estimates.

Exploration values for SBM tenements have been determined using methods commonly used for such valuations. As a large part of SBM's exploration assets has been the subject of recent transactions, the Actual or Comparable Transactions approach has been of primary use in this assessment. The tenements host numerous individual resources and AMC has applied a Yardstick Value to SBM's formally reported resources where possible.

The total Technical Value estimated for SBM's mineral assets, including a salvage value on the Bluebird plant, is \$13.6M to \$18.6M with a preferred value \$16.1M.

The major mineral asset of NuStar is the Paulsens Project in the Ashburton region of Western Australia, which contains an Indicated and Inferred Resource of 1.44 Mt grading 11.7 g/t Au. NuStar has not completed a documented feasibility study although most of the elements of such a study are complete and a decision to proceed with project construction was made on that basis. The project is based on underground mining of a Probable Reserve of 1.2 Mt grading $10.7$ g/t Au to be mined and treated at an annual rate of 250,000t.

AMC reviewed the June 2004 resource estimate for the Paulsens Project and concluded that it had been prepared using accepted industry practice and classified and reported in compliance with the JORC Code.

AMC has valued the mineral assets of NuStar in two parts. Discounted cash flow ("DCF") modelling was used to determine a Net Present Value ("NPV") to determine a range of Technical Values for NuStar's interest in the Paulsens Project. AMC prepared post-tax cash flows using a spot gold price advised by Deloitte of US\$418 per ounce and an exchange rate of US\$0.72/A\$1.00 giving an Australian dollar gold price of \$580.56. AMC tested the sensitivity of the NPV to gold price, grade and costs. The final valuation was \$9.1M to \$17.1M, preferred value \$14.6M.

NuStar holds exploration tenements adjacent to the Paulsens tenements and additional exploration tenements in the Ashburton region.

Exploration values for tenements at and adjacent to the Paulsens Project as well as for the regional projects have been determined using methods commonly used for such valuations. The Technical Values which result from this analysis are \$1.2M to \$1.7M, preferred value \$1.4M.

The total Technical Value estimated for NuStar's mineral assets is \$10.3M to \$18.8M with a preferred value \$16.0M.

	QUALITY CONTROL
The signing of this statement confirms this report has been prepared and checked in accordance with the AMC Peer Review Process. AMC's Peer Review Policy can be viewed www.ameconsultants.com.au.		at
Project Manager



	Dervill.

DP Carville	Signed	19 October 2004 Date


Peer Reviewer


	Lillis.
LJ Gillett		19 October 2004
	Signed	Date

IMPORTANT INFORMATION ABOUT THIS REPORT

Confidentiality

This document and its contents are confidential and may not be disclosed or published in any manner (except as required by law) unless AMC Consultants Pty Ltd ("AMC") has given its prior written consent to the form and context of the disclosure or publication and the identity of the person(s) to whom it is to be disclosed or published.

This opinion or report is addressed only to the client named in the document and is solely for the client's benefit in connection with the project that is the subject of this document. It may not be relied upon by, nor may any copy of it or extract from it be supplied to, any person other than the client named (including its officers and employees), nor is it to be quoted or referred to in any public document or filed with any government or other agency without AMC's prior written consent.

AMC accepts no liability whatsoever, whether in contract, in tort or negligence or otherwise, for any loss or damage (including consequential or economic loss or damage) arising as a result of any person other than the named client acting or refraining from acting in reliance on any information, opinion or advice contained in this document.

Responsibility

AMC warrants that in the preparation of this document it has taken reasonable care in accordance with standards ordinarily exercised by members of the profession generally who practice in the same locality and under similar conditions. AMC accepts no liability whatsoever in respect of any failure to exercise a degree or level of care beyond such reasonable care. No other warranty, express or implied, is given, save where necessarily incorporated by statute.

In preparing this document, AMC has relied on information and reports provided to it by or on behalf of the named client. AMC accepts no liability in respect of such data or information (save that it has exercised reasonable care (as set above) in the use of such data and information). AMC makes no representation and gives no warranty as to the accuracy or completeness of the data or information contained in any information or reports that it has relied on.

Currency of Information

This document has been prepared as at the date stated within (or, if no date is stated, as at the date of delivery to the named client). This document:

supersedes any previous report or communications (whether interim or otherwise) dealing with any (a) matter that is the subject of this document; and
takes no account of any matters coming to the notice of AMC after the date of this document $(b)$ (including any matters that existed at that date but which were not known to AMC until subsequently).

It should be noted that, given the nature of most technical opinions and reports, developments after the date of the report are likely. For that reason, most experienced clients retain their technical consultant on an ongoing basis.

Recommendations

AMC accepts no liability whatsoever for any matters arising if any recommendations contained in this report are not carried out, or are partially carried out, without further advice being obtained from AMC.

Payment of Fees

No person (including the client) is entitled to use or rely on this document and its contents at any time at which any fees (or reimbursement of expenses) due to AMC by its client are outstanding and, in those circumstances, AMC may require the return to it by any person of all copies of this document and any part of it in their possession.

EXECUTIVE SUMMARY

1			INTRODUCTION
2			ST BARBARA
	2.1		Scope of Work, Limitations, Assumptions, Assumptions and Valuation Methodology 2
	2.2		Titles
	2.3		Environmental Issues
	2.4		Background
	2.5		Geology and Mineralisation at Meekatharra
	2.6		Annean Joint Venture
		2.6.1	Valuation
	2.7		Reedys Joint Venture
		2.7.1	Valuation
	2.8		Polelle Joint Venture
		2.8.1	Valuation
	2.9		Paddy's Flat Project
		2.9.1	Valuation
	2.10		Other 100% Owned Meekatharra Projects
		2.10.1	Jack Ryan
		2.10.2	Batavia
		2.10.3	Burkes Find
		2.10.4	Wanganui
		2.10.5	Yagahong - Gabanintha
		2.10.6	Quinns
		2.10.7	Burnakura
		2.10.8	Abbotts
	2.11		Chesterfield Joint Venture
	2.12		Non Meekatharra Interests
		2.12.1	Mikhaburra
		2.12.2	Cue
		2.12.3	Kalgoorlie
	2.13		Summary of Valuation
	2.14		Previous Valuation
3			NUSTAR ………………………………………………………………………………………………
	3.1		Overview
	3.2		Tenements
	3.3		Valuation Methods
		3.3.1	Paulsens Project
		3.3.2	Exploration Portfolio
	3.4		Paulsens Project - Geology and Resources
		3.4.1	Geology
		3.4.2	Previous Exploration
		3.4.3	Data Collection
		3.4.4	Resource Estimate
		3.4.5	Comment on Data Collection and Resource Estimation
		3.4.6	Potential for Extensions and Upgrades to the Resource
	3.5		Paulsens Project - Operations
		3.5.1	Mining
		3.5.2	Treatment
		3.5.3	Administration
		3.5.4	Total Costs

3.6			Environment and Social
	3.6.1		Consultation
3.7			Exploration Tenements
	3.7.1		Tenements Adjacent to Paulsens
	3.7.2		Ashburton Exploration Tenements
		3.7.2.1	Mount Clement and Eastern Hills Area
		3.7.2.2	Metawandy Creek
	3.7.3		Red 5 Joint Venture
		3.7.3.1	Meningee Well Exploration Licence
		3.7.3.2	Emily Well Exploration Project
3.8			Valuations
	3.8.1		Paulsens Project - NuStar's Interest
	3.8.2		Exploration Portfolio
		3.8.2.1	Licences Adjacent to Paulsens
		3.8.2.2	Mount Clement and Eastern Hills Area
		3823	Metawandy Creek
		3.8.2.4	Red 5 Joint Venture
		3.8.2.5	Meningee Well Exploration Licence
		3.8.2.6	Emily Well
		3.8.2.7	Exploration Licence Applications
	3.8.3		Valuation Summary
39			Previous Valuations
			SOURCES OF INFORMATION
			QUALIFICATIONS

TABLES

Table 2.1	Annean Joint Venture Mined Resources as at August 2004
Table 2.2	Reedys Joint Venture, Mineral Resource Estimates as at August 2004 10
Table 2.3	Mineral Resources at Paddy's Flat, August 2004
Table 2.4	Valuation of SBM's Interest
Table 3.1	Summary of Paulsens Drilling
Table 3.2	Proportion of Sample Types
Table 3.3	Paulsens Mineral Resource Estimate - June 2004
Table 3.4	Treatment Plant and Infrastructure Capital Costs
Table 3.5	Processing Plant Operating Cost Estimate - 250,000 tpa
Table 3.6	Administration Operating Cost Estimate - 250,000 tpa
Table 3.7	Post Tax Value of NuStar's Interest in Paulsens Project
Table 3.8	Value of NuStar's Exploration Assets
Table 3.9	Summary of Technical Value of NuStar's Mineral Assets

$\overline{4}$ $\overline{5}$

FIGURE

Paulsens Project - Post Tax NPV vs Gold Price.................................... Figure 3.1

APPENDICES

APPENDIX A Tenements held by SBM

APPENDIX B Tenements held by NuStar

INTRODUCTION $\mathbf{1}$

AMC Consultants Pty Limited ("AMC") has been requested by Deloitte Corporate Finance Pty Limited ("Deloitte") to undertake an independent assessment of the Technical Value of the mining and exploration assets of St Barbara Mines Limited ("SBM") and NuStar Mining Corporation Limited ("NuStar"). Deloitte has been appointed by the directors of SBM. The assessment is to form part of the independent expert's report to be prepared by Deloitte in relation to the following transactions proposed by SBM:

the disposal of the 5% royalty held by SBM in respect of the Paulsens gold deposit ("Paulsens Royalty") to NuStar, a 54% held subsidiary of SBM, for \$5.1M
the pro-rata buy back of up to 192M SBM shares in exchange for up to 240M NuStar shares.

SBM's mineral assets include interests in:

ore reserves, mineral resources and exploration potential within tenements in the Meekatharra region, mainly between Meekatharra in the north and the previously Reedys area in the south
a number of other exploration tenements, mainly in the Yilgarn region of Western Australia.

NuStar's mineral assets include interests in:

the Paulsens Project in the Ashburton region of Western Australia
exploration properties in the Ashburton region
an exploration property in the Cue region of Western Australia.

The report provides independent valuations of the mineral assets of each company and these valuations have been prepared in accordance with the Code and Guidelines for Technical Assessment and/or Valuation of Mineral and Petroleum Assets and Mineral and Petroleum Securities for Independent Expert Reports, 1998 ("the Valmin Code").

AMC has not audited resources or reserves nor mining schedule estimates, cost reports and budgets but has aimed to satisfy itself that these estimates have been prepared in accordance with proper industry standards and are based on acceptable quality and reliability of data. Except where noted, AMC has found that resources and reserve estimates have been prepared using accepted industry practice and have been classified and reported in compliance with the Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves, September 1999 ("the JORC Code").

Values determined in this report are effective as at 30 September 2004.

The value for the Paulsens Project has been assessed by discounted cash flow methodology is a Technical Value as defined by the Valmin Code. We have determined post tax values per instruction from Deloitte. AMC has not applied any premium or discount to account for market, strategic or other considerations to the Paulsens Project value.

Exploration assets have been valued using accepted industry methods of valuing exploration properties and resources not subject to mining operations. The Valmin Code considers both a Technical Value and a Strategic Value, which has a premium or discount to the former, in assessing a Fair Market Value. In this case, as AMC has taken into account recent transactions, has not modified its value estimates and considers them to be market values.

$\overline{2}$ ST BARBARA

2.1 Scope of Work, Limitations, Assumptions, Assumptions and Valuation Methodology

AMC was asked to estimate a market value for the mineral assets of SBM effective at 30 September 2004 and assuming the current gold price.

SBM's net assets comprise:

Cash, receivables, pre-payments, debtors, creditors, inventories and provisions.

AMC has not estimated values for these assets but notes that they include:

the royalty on the Paulsens Project (i)
(ii) the cash element of bonds on mineral tenements. SBM advised this amounts to \$2.75M at 30 September 2004. SBM has a policy of progressive rehabilitation and the only area in which there is likely to be significant future capital expenditure, other than at Bluebird plant and camp site when operations finally cease, are the South Junction waste dump and tailings dams at Bassetts West, Bluebird Cell Five and Reedys. The total estimated cost of the latter items is around \$2.3M
$(iii)$ spares and consumables stocks
$(iv)$ provision for rehabilitation.
Land, plant and equipment.

AMC has not estimated values for these assets but notes that they include:

$(i)$ housing in Meekatharra
$(ii)$ pastoral stations which SBM intends to lease out
$(iii)$ the Bluebird plant, associated mobile and other equipment, administration facilities and camp. These are in good condition and would have a very substantial replacement value. While under care and maintenance, costs (including insurance) are at a level of around \$50,000 per month as advised by SBM management. SBM is negotiating an agreement by which the new owner of the Burnakura project can treat ore through the plant, probably from late 2004 or early 2005. A successful agreement will alleviate the costs of care and maintenance. At final closure there will be a salvage value offset by rehabilitation costs and by any other termination costs. A similar size plant at Big Bell sold recently for \$2.75M. AMC considers that a salvage value of \$2.25M to \$2.75M with a preferred value of \$2.5M for the Bluebird plant is appropriate. SBM's environmental consultant currently estimates a rehabilitation cost at closure for Bluebird of around \$4.2M. Deloitte advises that a provision of \$4.2M has been made in SBM's accounts for such rehabilitation.
Mineral tenement assets which are the subject of this valuation report.

AMC previously reviewed SBM assets in 2000 and 2001 prior to the acquisition of the Paddy's Flat Project. For this assessment, it visited site, held discussions with SBM management, advisors and technical staff and reviewed numerous documents relating particularly to resource estimation and exploration. Because of management changes, some staff losses and the present care and maintenance state of operations, the information supplied lacked completeness in some relevant areas. This applied particularly to resource estimates for which a normal information back-up was not always available and for which there was some ambiguity. A number of resource estimates were quite old and the estimators no longer on SBM staff. The database for many estimates involved several different periods of drilling and assay

treatment which can affect reliability. However, for all reviewed projects there was a reasonable procedure to eliminate unreliable data and a fairly standard estimating procedure involving inverse distance grade interpolation into a block model with usually low cut-off grades and the use of upper grade limits to guard against the impact of erratically high sample assays.

In all cases of formally reported resources, there has been an industry standard optimisation which uses a fairly high gold price, typically 150% of the spot price. In the case of informal resource estimates, the estimates do not have an economic limitation and represent all resource as projected from sample assays.

Classifications of resources, where reviewed, are reasonable in terms of confidence levels which can be attributed to the density and quality of data. All estimates have been prepared by Competent Persons as defined by the JORC Code.

The resource estimates tabulated herein are accepted by AMC as being reported in accordance with the JORC Code although it has reservations as to the adequacy of economic limits placed on some of them.

There are other tonnage and grade estimates for various deposits which are not reported herein and have been removed from SBM's "formal" resource estimation report. AMC concurs with that action.

Valuation of exploration projects often uses information about past exploration expenditure. For SBM, the records are difficult to interpret, particularly in regard to separation of "on-mine exploration" from other exploration. As AMC has adopted a different primary approach to the valuation, this is not considered to be a major issue.

In previous valuations of SBM, AMC has estimated an "Operational Value" after projecting a life of mine model, based both on the existing resources and reasonably quantifiable potential extensions thereof, and an "Exploration Value" for the remaining mineral assets. As the operation is currently on care and maintenance and there is no existing production plan or potential one which, in AMC's opinion, can be reasonably defined, the values in this report are "Exploration Values".

Valuation of exploration assets is subjective and usually involves a judgement after application of several different commonly used methodologies. These include:

The Past Expenditure method which applies a judgement of effectiveness and prospectivity enhancement (using a prospectivity enhancement multiple or "PEM") to past exploration expenditure. As noted, this has not been a significant contribution to valuations herein.
Use of Actual or Comparable Transactions as a basis to estimate a market value. As many such transactions involve farm-in or joint venture deals, it can be necessary to modify the Deemed Expenditure in such a deal for the time impact of the farm-inor's (or buyer's) expenditure obligation and the probability that the earn-in expenditure will be completed. The Deemed Expenditure is inherent in all farm-in deals and measures the value placed on the vendor's interest (usually the whole project) at the time of the deal if it can be assumed that the earn-in expenditure will be completed, in accordance with the formula:

Deemed Expenditure (\$) = $\frac{\text{Vendor's %}$ interest at completion $\frac{\text{Vendor's %}$ interest at completion of "earn - in" $\frac{\text{Vodor's %} \cdot \text{Vodor's "}}{\text{Vodor's %} \cdot \text{Vabor of "}}$

As a large part of SBM's exploration assets has been the subject of recent transactions, this approach has been of primary use in this assessment.

Use of values per square kilometre of exploration title derived from a value assessment of numerous recent transactions in similar geological terrains. AMC assesses that such unit value for greenstone terrains in the Yilgarn area of Western Australia typically vary in the range \$2,000 to

\$10,000 with some lower or higher values depending on evidence of prospectivity and some variation according to the size and nature of the tenement. For instance, small mining leases may transact at a higher unit value than large exploration licences, other things being equal. Mature areas with limited obvious prospectivity usually transact at the lower end of the range and areas of limited exploration testing but with evidence of good mineralisation at the higher end.

In some SBM projects, there are large areas of tenement applications, in some cases over ground which has previously been held under a granted SBM title. AMC understands that the company has priority over all of these areas and therefore has recognised a discounted value per unit area for some of it.

Use of unit value per ounce of gold contained in resources. Again this is based on comparable transactions. In AMC's experience, the typical range is from \$5 or less for low quality resources, often those residual to mining operations now ceased, to \$30 or more for resources within which an ore reserve is very likely to be proven. Values should be higher for an area containing an existing treatment plant owned by the entity concerned than for one remote from a plant or requiring toll treatment at a plant owned by another.

AMC has applied this approach in this valuation, as there are numerous individual resources. It has not used it for SBM's "informal" additional quantifications of tonnage and grade.

The Valmin Code considers both a "Technical Value" and a "Strategic Value", which is a premium or discount to the former, in assessing a Fair Market Value. In this case, as AMC has largely taken into account recent transactions, it has not modified its value estimates and considers them to be market values.

$2.2^{\circ}$ Titles

The status of SBM's material Tenements has been reviewed by Resource Mapping Pty Ltd which concludes that the selected tenements are in good standing. Material tenements were identified by SBM as those hosting resources or with a reasonable expectation of resource discovery.

SBM's current tenements are listed in Appendix A.

In March 2004, SBM reached an agreement with two native title claimant groups such that it is obliged to pay a royalty of 0.75% of value of production from any mining leases granted after that date. It will also pay an annual amount equivalent to 10% of tenement rents.

AMC understands that there are no outstanding plaints or material contingent liabilities relating to granted tenements except for third party royalties as follows:

a royalty of 1.5% to 2.5% of production value payable to Homestake Australia Ltd on certain tenements at Reedys
an additional royalty of 1% on the Rand tenements at Reedys
a 1.5% royalty on Stakewell tenements and 2% royalty on Tuckanarra tenements
a small royalty on the Mount Marion Project in Meekatharra North.

2.3 Environmental Issues

As noted above, SBM has a policy of progressive rehabilitation and its record of managing these issues is good as supported by government assessments. The major outstanding requirements are:

the Bluebird plant area as and when operations cease
the Reedys tailing facility where the impact of erosion is estimated to require future expenditure of \$1.0M to \$1.5M
the active Bassetts West tailing facility south of Bluebird which is in-pit and, when filled to within 10m to 15m of surface level, will require work costing around \$0.3M to \$0.4M
Cell 5 of the above ground level tailings facility at Bluebird which will require some \$0.2M to \$0.3M of work if utilised for future tailings
the South Junction waste rock dump which requires about \$0.3M of expenditure for final rehabilitation.

With the ability to use Cell 5, it is estimated that there is adequate capacity for around 20 Mt of future tailings.

Meekatharra operations do not utilise groundwater given good quality and quantity in-pit sources. Recent reports indicate there are no material issues associated with discharge of water and the monitoring is of high standard. Similarly a recent review of the tailings storage facilities concludes that they are being managed well in accordance with good operating practice.

2.4 Background

SBM was founded in 1969 as Endeavour Oil Company NL. It became primarily a gold mine operator and explorer with its major asset the Bluebird Mine and surrounding tenements near Meekatharra in Western Australia. In 1990 it acquired a number of mineral assets in the same area held by Mr Ross Atkins and changed its name to SBM. Ross Atkins had acquired some projects from Dominion Mining Limited ("Dominion") and Metana Minerals NL ("Metana").

Mining at Bluebird was suspended from July 1998 to mid 2000 while low grade stockpiles were treated. Open pit and underground mining then continued until March 2003 and the plant continued to treat low grade stockpiles (from the Paddy's Flat area) until early 2004 from which date the plant has been on care and maintenance.

Total production at Bluebird from 1986 to 2004 has been 31.7 Mt milled at an average grade of 1.62 g/t Au for the production of 1.5M ounces of gold.

In 1996, SBM acquired the mineral tenements and some plant and equipment of the Reedys Gold Mine which is centred some 50 km south of Bluebird. Between 1984 and cessation of operations in 1997/98, some 6.9 Mt of ore at an average grade of $3.04$ g/t Au were treated at Reedys to produce more than 628,000 ounces of gold.

SBM managed the rehabilitation of the old mining areas at Reedys and spent some \$2.0M on further exploration. In 2000, it farmed out the Tuckanarra sub project area to Anglo Gold ("Anglo Gold"), which spent some \$0.75M on exploration before withdrawing.

In 2003, SBM farmed out the major part of the Reedys project to Gold Fields Australasia Pty Ltd ("Gold Fields") which spent some \$0.75M on exploration before withdrawing.

SBM also farmed out another sub project at Reedys called Burnakura in 2003 but subsequently sold all of its interest to its joint venture partner for \$1.0M.

Other farm outs included the Chesterfield project northwest of Bluebird in 2001.

In October 2002, SBM acquired the Paddy's Flat project at Meekatharra from Barrick Gold Australia Limited ("Barrick") and treated low-grade stockpiles from that project at Bluebird until 2004. From 1980 to 1996 predecessor companies to Barrick treated some 16.6 Mt of open pit ore at an average grade of 2.1 g/t Au from Paddy's Flat for a little over 1M ounces of gold production. Earlier historical production approximated 0.9M ounces, some $1.16$ Mt at 16.8 g/t Au being from the underground Fenian's Mine.

Previous management of SBM planned to develop and mine underground ore from Paddy's Flat and treat it at Bluebird in conjunction with lower grade open pit ore from Mickey Doolan, Red Spider and Macquarie at Paddy's Flat, Batavia and Mulla Mulla and also stockpiled ore. However, with the cessation of operations at Bluebird, plans are being re-evaluated. In 2003/2004, SBM farmed out a large part of its exploration holding at Meekatharra in a number of joint ventures including:

the Annean Joint Venture with Aurogenic Resources Pty Ltd ("Aurogenic") which includes a large part of SBM's traditional tenement holding from Meekatharra south towards Reedys; the Abbotts Project northwest of Meekatharra; part of the Paddy's Flat acquisition tenements called Meekatharra North and the western part of the original Reedys project area (the Stakewell and Tuckanarra sub- project areas)
the Polelle Joint Venture with Elara Mining Limited ("Elara") which covers an area of traditional SBM exploration tenements east of the so called Norie Pluton
the Reedys Joint Venture with Elara over the ground in which Gold Fields relinquished its interest.

The Chesterfield Joint Venture continues but includes a new managing party, Terra Gold NL ("Terra") previously Aurex Consolidated Limited ("Aurex").

Excluded from the Reedys Joint Venture is the Jack Ryan resource, which is 100% owned by SBM and from the Meekatharra North joint venture area, the Five Mile Well resource. The Batavia ore reserve, north of Bluebird, is excluded from the Annean Joint Venture. SBM retains a 100% interest in the main part of Paddy's Flat, several less advanced sub-project areas in the Meekatharra area and it also has minor interests away from Meekatharra.

Neither of the Elara Joint Ventures nor the Aurogenic Joint Venture dictates the treatment of any newly discovered ore at Bluebird. However they do include sole risk provisions for SBM to enable it to cause a deposit to be mined in circumstances where it has a minority vote.

$2.5$ Geology and Mineralisation at Meekatharra

The Meekatharra greenstone belt has been the subject of extensive gold mining and exploration focused on several centres including Bluebird, Reedys and Paddy's Flat.

The greenstone belt trends north northeast and consists of a lower mafic unit of basalts, banded iron formation ("BIF") and ultramafic rocks overlain by a lower felsic volcaniclastic unit, an upper mafic unit and an upper felsic unit. These units have been subjected to greenschist facies metamorphism, folding, faulting and shearing and intruded by dolerite, felsic porphyry and granitoid bodies.

Although there is some current thought that the major folding structure is anticlinal, the traditional interpretation is that sequence is folded into a north north-east trending synclinal structure called the Polelle Syncline with steep dipping limbs and a general southerly plunge. The core of the syncline is intruded by several granitoid bodies, the largest of which is the Norie Pluton. Largely sub-parallel, north trending regional shear zones disrupt the syncline and range in width from a few metres to more than 200m. Many of the gold deposits are associated with such shears, often near cross-trending structures.

Gold mineralisation occurs in a number of different geological styles. They include:

gold bearing sulphide mineralisation occurring as disseminations, fracture fillings or with quartz veining within porphyritic intrusions emplaced along shear zones and faults, mainly in ultramafic host rocks
gold and sulphide mineralisation hosted by BIF units, usually in cross-cutting fractures
gold in steep dipping lodes and quartz veins, often associated with contacts between different rock types e.g. granite/mafic volcanics.

Other factors recognised as being significant to localisation of gold mineralisation are proximity to anticlinal axes, proximity to Proterozoic dolerite dykes particularly at deviations in strike, spatial correlation with post tectonic granitoids like the Norie Pluton and silica-pyrite alteration with variable content of carbonate, fuchsite and other minerals.

A well developed weathering profile can extend to more than 100m depth so that supergene enriched gold can occur in laterite caps and in saprolitic clays. Alluvial cover is extensive and can exceed 100m thickness. Salt lakes occur in the central part of the Annean Joint Venture block.

2.6 Annean Joint Venture

Under the terms of an agreement dated March 2004, Aurogenic can earn a 45% interest by spending \$3.0M on exploration within two years with a minimum commitment of \$1.0M within one year and, at its election, 51% for \$4.0M within three years from commencement, then 70% for a total \$8.0M within five years from commencement. Aurogenic will manage exploration.

Excluded from the joint venture but within the Meekatharra North area is the existing Five Mile Well resource of around 18,000 ounces down to 390m ASL. Also excluded are four tenements (one granted) covering the Batavia reserve north of Bluebird.

To 30 June 2004, Joint Venture expenditures totalled \$172,000 and is estimated that some \$400,000 has been expended to date.

The area of the joint venture contains a number of sub-project areas, reviewed below and a number of resources classed by SBM as "Formal-Reportable" at August 2004 as shown in Table 2.1.

Area		Measured		Indicated		Inferred		Total
	000t	g/t Au	000t	$g/t$ Au	000t	g/t Au	000t	$g/t$ Au
Bluebird East			2,117	1.2	38	1.6	2,155	1.2
Bluebird Deeps	w.	$\mathbf{r}$			135	7.3	135	7.3
Bluebird Extension		$\tilde{\phantom{a}}$	1,656	1.8	885	1.6	2,541	1.7
Mystery			465	1.4	21	1.8	486	1.4
Ironbar			290	1.6	140	1.5	430	1.6
Luke's Junction			201	1.8	-61	1.8	262	1.8
Nannine Reef					267	2.1	267	2.1
Kohinoor Deeps	$\overline{\phantom{a}}$		33	9.3		10.2	40	9.5
Total		$\mathbf{u}$	4,762	1.6	1,554	2.2	6,316	1.7
Contained Ounces		$\overline{\phantom{a}}$		245,000		110,000		345,000

Table 2.1 Annean Joint Venture Mineral Resources as at August 2004

$2.6.1$ Valuation

There has been extensive previous exploration on this area. However, it is not possible to separate that related to areas already mined from that relating to remaining prospectivity. SBM advises that some 30% of the \$2M to \$3M it has spent on non-mine exploration in the last two years or so was on these areas.

The terms of the Joint Venture imply Deemed Expenditure for SBM of \$3.7M at the 45% earning stage, \$3.8M at the 51% stage and \$3.4M at the 70% earning stage but these figures neglect the time impact on value and the risk that Aurogenic may not complete the expenditure. Using a discount factor of 0.5 to 0.6 to reflect time and risk, the indicative value of SBM's interest at the time of the deal is around \$1.7M to \$2.3M. Aurogenic's work to date would not have affected value except to improve the discount factor used.

Using a unit value of \$3 to \$5 per contained ounce of gold in resources and a unit value of \$2,000 to \$3,000 per km² of granted tenements for the remainder of the exploration area, the estimated value would be \$1.9M to \$3.1M. An additional value of \$500 to \$1,000 per $km²$ for the tenements under application would increase that to \$2.2M to \$3.7M. SBM's beneficial interest at present is around 90% $(3.7/4.1 \times$ 100%), hence the estimated value by this approach would be \$2.0M to \$3.3M.

AMC estimates a final value range of \$2.0M to \$3.0M, preferred value \$2.4M.

2.7 Reedys Joint Venture

From 10 November 2003, Elara has the right to earn a 51% interest in the project by spending \$3.25M within two years and 65% by spending \$5.25M in four years. The minimum commitment is \$0.75M in Year 1. SBM retains management. Elara had spent \$0.35M to 31 August 2004 and AMC is advised the year to date figure would be around \$0.5M.

SBM originally farmed out the area to Gold Fields on similar terms. Gold Fields spent some \$0.75M before withdrawing in 2002.

After acquisition of the Reedys project in 1996 and prior to farm-outs and sales of some areas, SBM spent some \$2M to \$3M on exploration but much of this was on Jack Ryan (excised), Burnakura (sold) and Tuckanarra (farmed-out to Anglo Gold then joint ventured with Aurogenic).

The area of granted tenements is 192 km² and the total area, including applications, has been reported at over 250 km².

There are three main trends of gold mineralisation within the favourable greenstone geology:

the Reedys line from Reedys South through the mainly underground mining targets associated with old pits, South Emu, Triton and Rand to Jack Ryan, which is excluded from the Joint Venture, northwest to Boomerang and Kurara. The latter two projects are in BIF, the former in ultramafics.
the Turn of The Tide ("TOTT") line including Culculli and Thompsons and the intersecting northeast trending
Tough Go line.

Ore from these areas provided much of the production of 628,000 ounces produced at the Reedys treatment plant until 1997/98.

After SBM acquired the area and before it farmed it out to Gold Fields, it focussed exploration on Jack Ryan, Burnakara and Tough Go. Some low grade stockpiles were trucked to Bluebird but no new ore was mined.

Gold Fields focussed its work on the Tough Go and TOTT lines, drilling nearly 25,000m of RAB and 2,000m of air core seeking stronger mineralisation below the areas previously tested by shallow drilling. Generally the best results were of disappointing grade. Prior to withdrawal, its staff recommended a change in focus to the underground targets of the Reedys line.

Elara's work to date has included air core drilling at TOTT with results awaited. Deep drilling of the Reedys line is planned and several conceptual targets have been defined.

Resource estimates classed by SBM as "Formal-Reportable" at August 2004 are listed in Table 2.2.

"Informal estimates" by SBM add small tonnages from deposits including Missing Link/West and Paddy West.

Area		Measured		Indicated		Inferred		Total
		Resource		Resource		Resource
	000t	$g/t$ Au	000t	$g/t$ Au	000t	$g/t$ Au	000t	$g/t$ Au
North Rand		$\overline{\phantom{a}}$	98	1.9			98	1.9
Triton Deeps	ш.	$\overline{\phantom{a}}$	78	8.5	u.		78	8.5
Triton North Deeps	$\sim$	$\bullet$	217	5.7			217	5.7
South Emu	ш.	$\bullet$	315	5.3			315	5.3
Boomerang Deeps	ш.				267	5.6	267	5.6
Rand Deeps	L	$\pmb{\ast}$	i.	$\mathbf{u}$	130	5.0	130	5.0
Total		$\overline{\phantom{a}}$	708	5.3	397	5.4	1,105	5.3
Contained Ounces		$\overline{\phantom{a}}$		121,000		69,000		190,000

Table 2.2 Reedys Joint Venture, Mineral Resource Estimates as at August 2004

The estimates concur with those in a January 2000 SBM memo and are derived after a then review of earlier estimates. There is limited supporting information as to database reliability, estimating parameters and methods or approach to resource classification. Limited information on optimisations suggests a high gold price assumption in the estimates and AMC understands that the stated resources are sub-economic. Boomerang Deeps represents the balance of an underground mining plan that was stopped short. Given lack of information, AMC is not able to comment on the reliability of the estimates or their significance for potential economics.

$2.7.1$ Valuation

Total exploration expenditure is very large. Even since mining and treatment ceased it is apparent that several million dollars have been expended though much of it has been on projects no longer part of the Reedys Joint Venture.

The Burnakura project was sold for \$1M to SBM's joint venture partner not long after the farm-in commenced. An underground resource of about 100,000 ounces contained is being developed for mining accessed by decline from a pre-existing open pit and there are other former open pits in the area.

The Elara Joint Venture entails a Deemed Expenditure to SBM of \$3.1M at the time Elara earns 51% and \$2.8M when it earns 65%. These figures do not take into account the effect of time on money value nor the risk that Elara will withdraw before earning its interest. Using a factor of 0.5 to 0.6 to account for these issues, the implied value of SBM's interest at the time of the deal is \$1.4M to \$1.9M. Elara's work would not impact on the value to SBM except to reduce the degree of discounting.

Alternatively a value of \$3 to \$5 per ounce of contained gold in resources and a unit value of \$2,000 to \$3,000 per km² granted and \$500 to \$1,000 per km² for applications for the remainder of the exploration potential indicates a value of \$1.0M to \$1.6M of which SBM's beneficial share could presently be around 90% (3.1/3.5 x 100%) or \$0.9M to \$1.5M.

AMC concludes a value for SBM's interest of \$1.2M to \$2.2M, preferred value \$1.7M.

$2.8$ Polelle Joint Venture

In a similar non-managed joint venture dated 10 November 2003, Elara has the right to earn 51% for \$3.0M expenditure in two years and 65% for \$5.0M expenditure in four years. The minimum expenditure is \$1.0M in Year 1. Elara had spent \$0.56M by July 2004 and AMC is advised that current expenditure could be around \$0.60M.

In the two year prior period, it is advised that SBM would have spent about 70% of its \$2.0M to \$3.0M non-mine exploration on this area.

The granted area of the Polelle Joint Venture is around 130 km² and there is a further 60 km² to 70 km² under application. It covers the prospective ground on the eastern contact of the Norie Pluton. Earlier work by SBM and subsequent drilling by Elara has generated several targets with gold mineralisation of which the most substantial are:

Mulla Mulla which is some 7 km from the Bluebird plant. Mineralisation forms two generally north south striking zones (East and West), the former some 600m long and the latter over 1 km. Gold occurs in saprolite overlying felsic volcanics and in the bedrock in multiple steep dipping zones associated with quartz veining and shearing.

Both East and West zones have been drilled with RC and limited diamond drilling. There is a Central zone which has yet to be so tested. The area is under transported cover but may be on strike with Bluebird East.

Kanji-Miniritchie which is further south and has not been drill tested as extensively.

Most intersections are low grade but there are a number of narrow high grade intersections. SBM at August 2004 quotes a "Formal-Reportable" Inferred Resource of 1.27 Mt at 1.6 g/t Au at Mulla Mulla East. This is supported by a pit optimisation with an average cash cost of \$900 per ounce and supported by a polygonal estimate of 1.3 Mt at 1.5 g/t Au. Later reports by Elara imply a higher tonnage and lower grade and an optimisation for a global estimate in April 2003 by SBM implied a small positive cash flow at a gold price of \$550 per ounce.

$2.8.1$ Valuation

Total attributable exploration expenditure is not available but it can be estimated that the combined SBM and Elara figure is around \$2.0M to \$2.7M of which some 85% is beneficially to SBM's account $(2.9/3.5 \times$ 100%) which with a PEM of 1.25 indicates a value to SBM of \$2.1M to \$2.9M. AMC places more emphasis on value indicated by the dealings subsequent to SBM's sole exploration...

The Joint Venture terms imply a Deemed Expenditure to SBM of \$2.9M and \$2.7M before discount. Using a time and risk discount factor of 0.6 to 0.7 reflecting the work since agreement, the implied SBM value is \$1.6M to \$2.0M, the relatively high factor taking into account the continuing upgrade of the resource and the prospectivity of the area.

Alternatively a value per resource ounce of \$10 to \$15 and a value per granted $km^2$ of \$5,000 to \$6,000 and \$500 to \$1,000 per km² of applications indicate a value for SBM's beneficial 85% interest of \$1.1M to \$1.5M.

AMC concludes a value of \$1.3M to \$2.0M, preferred value \$1.7M.

2.9 Paddy's Flat Project

SBM acquired the Paddy's Flat Project in October 2002 for a total payment of \$4.5M (\$1M payable on commencement of mining) and an obligation to pay a royalty of \$10 per ounce on mined production of gold exceeding 50,000 ounces. Of the total 97 km² of granted tenements and 52 km² of applications, SBM farmed out the applications and a granted 56 km² to Aurogenic (excluding the Five Mile Well resource) as part of the Annean Joint Venture but the remaining 41 km² contains all the significant gold deposits.

Included in the acquisition were physical assets estimated to roughly equate in value to the costs of rehabilitation associated with former mining and around 3 Mt of low grade stockpiles, about 2.3 Mt of which were treated with a cash surplus through the Bluebird plant by June 2004.

The main deposits occur in three sub-parallel lines in a north south trending zone of altered and metamorphosed volcanics over a strike length of nearly 5 km. The deposits can roughly be grouped into:

Southern Area:	Phar Lap Mickey Doolan (Mickey Doolan Line) Marmont
Central Area:	Fenian (Fenian - Vivian-Consols Line) Consols Vivian Ingleston $\overline{\phantom{a}}$ Prohibition - Red Spider (Prohibition Line) Alberts East (Mudlode) (Mickey Doolan Line)
Northern Area:	St Frances - Commodore Haleyon Democrat Macquarie (Mickey Doolan Line) Butlers.

Sulphide mineralisation in the Southern and Northern Areas is refractory with low gold recoveries. Better recoveries by conventional gravity and leach recovery can be obtained from the Central Area mineralisation.

Most deposits are hosted in a basal ultramafic unit of the sequence within the so called Paddy's Flat Shear Zone. Within the shear, several alteration zones are developed. West of the Shear Zone is the BIF hosting Prohibition-Red Spider. The BIF is cut by the Prohibition Fault and the mineralised lodes are approximately parallel to the Fault.

Fenian, Consols, Vivian and Ingleston are hosted by quartz veins with associated intrusive porphyry and in an alteration zone with high grades in so called spur veins which trend obliquely northwest-southeast. Mickey Doolan, Phar Lap and St Frances-Commodore occur in an alteration zone marked by carbonatefuchsite-quartz. Prohibition-Red Spider is related to fault and breccia zones in a ladder vein array within a folded BIF unit which plunges south towards a vertically dipping Proterozoic dolerite dyke.

Dominion and its successor companies produced some 1.0M ounces of gold from open pits along the Paddy's Flat Shear. A decline to test for underground mineable mineralisation was started from the base of the Consols pit but work was discontinued.

Since acquisition, SBM has carried out resource drilling at Prohibition - Red Spider and to a lesser extent at Mickey Doolan, drilling for metallurgical testing at Mickey Doolan and has completed a feasibility study with contributing studies on geotechnical and other matters. The August 2004 resource statement is set out in Table 2.3.

Area		Measured Resource	Indicated Resource		Inferred Resource			Total
	000t	g/t Au	000t	$g/t$ Au	000t	g/t Au	000t	g/t Au
Prohibition	u.		1,230	4.6	840	3.1	2,070	4.0
Vivian-Consols	$\overline{\phantom{a}}$		á.	$\overline{\phantom{a}}$	543	6.8	543	6.8
Mickey Doolan	w.			$\overline{\phantom{a}}$	2,762	1.5	2.762	1.5
Macquarie			339	2.9	148	2.8	487	2.9
Ingleston	u.		723	1.7	250	1.8	973	1.7
Five Mile Well	$\overline{\phantom{a}}$				339	1.8	339	1.7
Alberts East	$\mathbf{r}$		335	2.9	357	3.8	692	3.4
Mudlode	$\overline{\phantom{a}}$		109	2.2	w		109	2.2
Total	÷	w	2.736	3.3	5,239	2.5	7,975	2.8
Contained Ounces				292,000		426,700		718,700

Table 2.3 Mineral Resources at Paddy's Flat, August 2004

Informal estimates contain a larger tonnage for Mickey Doolan and for Vivian-Consols and estimates for a series of other deposits grading between 1 g/t Au and 2 g/t Au.

Metallurgical work indicates reasonable (better than 80%) recovery from the Ingleston Alberts East Lode ("East Lode") and Prohibition and more than 90% from Vivian-Consols. Samples from Mickey Doolan indicated lower recoveries around 65%.

AMC has reviewed reports supporting the Prohibition (including Red Spider) resource estimate and the Vivian-Consols estimate. It has seen no other information to support the reliability or classification of the other estimates. One report covers Five Mile Well but with a higher resource estimate without optimisation than that reported in Table 2.3.

A report on Mudlode with an objective of assisting the Vivian estimate concludes a lower tonnage but higher grade. The Alberts East estimate is supported by a report for a block model with inverse distance grade interpolation as is the largely oxide Ingleston estimate. There are several estimates for Mickey Doolan. The one quoted is supported by an optimisation at \$900 per ounce gold of which the upper 650,000t provides an incremental cash cost below \$600 per ounce, albeit with an apparent recovery assumption of 85%. The Mickey Doolan resource is largely below the existing pit.

The Prohibition estimate was carried out by a competent consultant using ordinary kriging into a 10m x 4m x 4m block model. It used a 1 g/t Au cut-off grade and a 40 g/t Au top-cut. The estimator noted significant short scale variability, variation in thickness and gravity and a strong relationship between grade and the presence of quartz and sulphide. It noted the database used samples from a number of different drill programs and different assaying methods but concluded all of the data was acceptable. The

methodology assumed a low grade cut-off to define a reasonably continuous body and it was noted that at higher cut-offs the resource would be less than 1 Mt but at a grade exceeding $5$ g/t Au.

Vivian-Consols comprises two separate resource estimates. Consols was estimated by SBM in a block model with inverse distanced interpolation (127,000t at 10.2 g/t Au). The Vivian estimate is by an external consultant who noted a high nugget effect, poor variability and used a 68 g/t Au top-cut and inverse distance grade interpolation into a block model. It is noted that drilling at a 10m x 10m density would be necessary to upgrade any of the resource from an Inferred classification. Its estimate gave a higher tonnage but lower grade than the SBM estimate for Vivian.

A review by the same consultant used for Prohibition prefers a simpler interpretation to produce a more continuous model and prefers kriging as an interpolation method. Its indicative estimate for Vivian produced a much higher tonnage at lower grade and a conditional simulation risk assessment exercise showed a wide range of possible gold contents.

The feasibility study is dated May 2004. It assumes the mining of nearly 1 Mt at 5.4 g/t Au over a two year period and mines Prohibition-Red Spider from a decline with a portal in the Prohibition open pit and then Vivian-Consols and East Lode. The Consols decline is used for secondary egress and ventilation. Poor geotechnical conditions with depth are noted for Vivian-Consols, hence a need for backfill. There is no information to review the development of the mining tonnage and grade from the resource estimated but AMC is advised the Prohibition consultant's block model was used. Potential upsides noted are (i) an increased resource recovery, (ii) possible additions from depth extensions and nearby metallurgically amenable mineralisation for instance at Fenians, (iii) grade improvements and (iv) metallurgical improvements. All deposits contributing to the study and the historically mined Fenians deposit are open in depth. One drillhole south of the Proterozoic dyke has intersected the Prohibition mineralisation.

The feasibility study assumes treatment at Bluebird at a rate of around 1.2 Mtpa in conjunction with mining of open pits including Batavia, the assumed costs and other parameters indicate a cash cost of nearly \$520 per ounce.

2.9.1 Valuation

Past expenditure cannot sensibly be used to guide current value but SBM's post acquisition costs of \$1.0M to \$1.5M can assist.

The actual transaction between SBM and Barrick involved cash of \$4.5M and a royalty. Part of the area has been farmed out but it is of low relative value. Plant and equipment value was reported to equate to rehabilitation costs. Treatment of the low grade stockpiles by SBM apparently significantly reduced the net cost but in its original assessment of value, it appears that this benefit was not a major factor.

The feasibility work to date does not permit a sensible valuation approach. It is apparent that SBM will need significant additional assessment expenditure before a definitive decision can be made.

In the absence of other approaches, AMC has considered resource ounce values of \$10 for the Prohibition and Vivian-Consols resources, \$7.50 for Mickey Doolan, Albert East and Mudlode and \$5 for the balance for a total value of \$6.1M.

AMC's estimated nett actual transaction cost of \$4.0M to \$4.5M plus SBM's post acquisition expenditure indicates a value of \$5.0M to \$6.0M.

AMC concludes a value to SBM of \$5.0M to \$6.0M, preferred value \$5.7M.

2.10 Other 100% Owned Meekatharra Projects

2.10.1 Jack Ryan

The August 2004 Measured Resource is 839,000t at 2.7 $g/t$ Au containing 73,600 ounces. It is north of the previously mined open pit and there has been an abortive previous attempt to drive a decline. An open pit optimisation using waste to rehabilitate the Reedys tailings facility was economically marginal.

At \$5 to \$10 per ounce contained, AMC's valuation is \$0.37M to \$0.55M, preferred value \$0.5M.

2.10.2 Ratavia

The Batavia reserve is on M51/187, some 5 km northwest of the plant and is an exclusion from the Annean Joint Venture. The August 2004 Measured Resource is 151,000 to at 3.1 g/t Au (15,000 ounces) and optimisation indicates a Proven Reserve of $121,000t$ at 2.9 g/t. The reserve could not be mined earlier because Aboriginal clearance was needed for grant of a mining lease.

At \$25 to \$30 per ounce contained, AMC's valuation is \$0.38M to \$0.45M, preferred value \$0.4M.

2.10.3 Burkes Find

This area of 39 km² granted is east of the main group of tenements. One or two small deposits are excluded from SBM's ground. While there is good arsenic geochemistry and favourable structures, exploration to date has not been encouraging.

There are no resources.

At a value per km² of \$2,000 to \$3,000, AMC valued the project at \$0.1M.

2.10.4 Wanganui

SBM mined a small vein deposit in granite within this area of 135 km² containing 8 km² granted in MLs and PLs. There has been no recent work or encouragement in the area.

AMC values the four granted MLs and PLs at a total of \$50,000 and the balance of the area at \$1,000 per km² for a total value of \$0.2M.

2.10.5 Yagahong - Gabanintha

This a large (159 km²) area of applications over the old Gabanintha mining field prospective for coppergold in ultramafic rocks. Because of a contained area of Aboriginal significance, it is expected that any granted area will be reduced.

At \$500 to \$1,000 per km², AMC values the area at \$0.1M to \$0.2M.

2.10.6 Quinns

41 km² of granted MLs and PLs and 17 km² of applications overlie this area of greenstones with historic gold workings. SBM is planning aeromagnetic survey and has spent in order of \$0.2M on exploration in the last four years.

On unit area and past expenditure, AMC values the project at \$0.1M to \$0.2M.

2.10.7 Burnakura

Five MLs over 45 km² overlies alluvial covered ground south of the Polelle Joint Venture and excluded from the Burnakura project sold to SBM's partner for \$1M. There has been little work on the ground and AMC values it at \$0.1M.

2.10.8 Abbotts

Two tenements in the Abbotts greenstone belt are to be disposed of for a contingent royalty payment. No value has been assigned.

2.11 Chesterfield Joint Venture

This large area of more than 190 $km^2$ of granted tenements covers greenstone geology over 50 $km^2$ northwest of Meekatharra in the Mingah Range.

In November 2001, SBM entered into joint venture with Independence Gold NL ("IG") which earned a 51% interest by spending \$0.50M on a program which tested two small fairly high grade resources containing and combined 8,000 ounces of gold.

In September 2004, a new agreement allows Terra to earn 60% by spending \$0.4M in exploration before 30 June 2007 (\$0.1M minimum commitment in Year 1), paying each of SBM and IG \$0.25M and providing them with a free carry to commencement of a feasibility study.

The latest deal values SBM's interest at around \$0.2M assuming a discount of 0.4 for time and probability of the deal being completed.

2.12 Non Meekatharra Interests

2.12.1 Mikhaburra

SBM has a 75% interest in an ML about 100 km west of Meekatharra of no significant value.

2.12.2 Cue

SBM has a 20% contributing interest with Cougar Metals NL which spent \$525,000 to earn its interest and is drill testing the Lights of Asia project, an extension of a historically mined high-grade quartz veined shear in granite. A resource estimate by SBM following RC drilling early in 2004 indicates a tonnage of several hundred thousand tonnes at around 3 g/t Au at an 0.5 g/t Au cut-off though subsequent core drilling suggested that several of the RC intercepts may have been exaggerated by contamination. A preliminary open pit optimisation indicates a robust surplus operating cash flow at \$550 per ounce gold with toll treatment.

Expenditure with a PEM of 1.5 indicates an SBM value of around \$0.3M while a unit ounce value suggests a value between \$0.1M and \$0.2M. AMC concludes a value of \$0.1M to \$0.3M, preferred value \$0.2M.

2.12.3 Kalgoorlie

At Boorara/Balagundi, SBM acquired two titles for \$10,000 and has a 75% interest in an area of mining lease applications and prospecting licences with anomalous nickel, copper and PGE.

AMC values its interest at \$0.1M.

2.12.4 Pelican Joint Venture

The Pelican Joint Venture between SBM and Pelican Resources NL (Pelican) covers remnants of two Exploration Licences (E08/853 and E08/854) about 30 km south of NuStar's Paulsens Project in the Ashburton Region of Western Australia. The remnants are linked by an Exploration Licence application. $(E08/1187)$ .

The joint venture arrangement is for SBM to earn a 51% interest in the tenements by spending \$0.6M over three years and a further 19% by spending a further \$0.4M in an additional year. The joint venture began in November 2002. SBM spent \$126,000 on exploration to October 2003 (reported in April 2004) consisting mainly of soil and rock chip sampling and RC drilling.

The tenements cover about 114 km² along the southern margin of the Wyloo Dome and cover the contact between the Duck Creek Dolomite and overlying Ashburton Formation Rocks. The Duck Creek Dolomite and the Mt McGrath Formation, which hosts gold mineralisation at Mount Olympus near Paraburdoo, are considered to be regionally prospective for gold mineralisation. Gold mineralisation associated with these stratigraphic units is characterised by anomalous arsenic. Several gold/arsenic rock and soil anomalies are located on the tenements at Woolshed, Gossan Ridge, Monster Lode, Fuchsite, Jeerinah and 3 Corner Bore.

The expenditure has confirmed the presence of anomalous gold and arsenic geochemistry although not identified new prospects. Gold values in rock chip samples are generally less than $0.5 \text{ g/t}$ Au although there are spot peaks up to 51 g/t Au. Applying a PEM of 0.6 to 0.8 to the expenditure indicates a value of SBM's interest of \$0.08M to \$0.10M.

2.13 Summary of Valuation

Table 2.4 summarises AMC's valuation of SBM's interest in mining tenements.

2.14 Previous Valuation

In 2001, AMC valued SBM mineral assets at \$32.5M to \$41.7M. Of that, \$5.9M was for surplus equipment, now sold and \$19.1M to \$24.1M was an "Operational Value", most of it based on reserves and resources since mined and treated. Some of the lesser resources valued herein, including Bluebird East, Mystery and Luke's Junction, were included, in part, in the 2001 Operational Value.

The remaining value \$7.5M to \$11.7M was for exploration potential and was discounted from \$8.3M to \$12.9M with a 10% market discount. It included approximately \$1.5M to \$2.5M in non-Meekatharra area interests which are no longer held by SBM and \$0.9M to \$1.2M for the Burnakura assets since sold for \$1.0M. However it excluded the Paddy's Flat assets, herein valued at \$5.0M to \$6.0M. The adjusted 2001 figure for the non-Paddy's Flat's assets of \$5.9M to \$10.7M compares with the 2004 estimate on the same basis of \$6.3M to \$9.8M.

Project		Value of SBM Interest
	Low (SM)	High (SM)	Preferred (SM)
Annean Joint Venture	2.0	3.0	2.4
Reedys Joint Venture	1.2	2.2	1.7
Polelle Joint Venture	1.3	2.0	1.7
Paddy's Flat	5.0	6.0	5.7
Meekatharra 100% Owned:
Jack Ryan	0.4	0.7	0.5
Batavia	0.4	0.5	0.4
Burkes Find	0.1	0.1	0.1
Wanganui	0.2	0.2	0.2
Yagalong	0.1	0.2	0.1
Quinns	0.1	0.2	0.1
Burnakura	0.1	0.1	0.1
Chesterfield Joint Venture	0.2	0.2	0.2
Non Meekatharra Interests:
Cue	0.1	0.3	0.2
Kalgoorlie	0.1	0.1	0.1
Pelican Joint Venture	0.08	0.1	0.09
Salvage Value of Bluebird Plant	2.25	2.75	2.5
Total	13.6	18.6	16.1

Table 2.4	Valuation of SBM's Interest
-----------	-----------------------------

In October 2003, SBM's mineral assets were valued by another independent party at \$17.6M to \$52.6M of which \$3.6M to \$8.7M was for "Operational Value" including Paddy's Flat. The remaining \$14.0M to \$45.9M was for exploration assets of which Burnakura, valued at \$1.6M to \$5.9M, and Malanti, valued at \$0.1M to \$0.4M are no longer interests of SBM. The indicative comparison for current, non-Paddy's Flat exploration interests is thus \$12.3M to \$39.6M. This much higher valuation was prior to the Elara and Aurogenic farm-outs and used some different methodology.

$\overline{\mathbf{3}}$ NUSTAR

$3.1$ Overview

The mineral assets of NuStar consist of mining and exploration tenements in the Ashburton region of Western Australia including the Paulsens gold project. The assets were previously held by Taipan Resources NL ("Taipan"), which changed its name to NuStar in March 2004. For clarity, this report will generally refer to NuStar even though activities may have been carried out by Taipan except where it is necessary to distinguish between the two entities (e.g. report titles).

An AMC Principal Resource Geologist and Principal Mining Engineer visited the Paulsens Project for the purpose of this valuation. AMC considers that other exploration areas were not material to the overall value of NuStar's mineral assets. AMC has held discussions with NuStar senior management staff and reviewed technical data and reports regarding the Paulsens Project and NuStar's exploration interests.

The mineral assets of NuStar can be summarised as follows:

Paulsens Gold Project: The Paulsens Project comprising Mining Leases M08/99 and M08/196 covering the identified mineral resource and the adjacent Exploration Licence E08/665. The Indicated and Inferred Resource estimated for the Paulsens Project at June 2004 is 1.44 Mt grading 11.7 g/t Au containing 541,000 ounces of gold. A Probable Reserve of 1.2 Mt grading 10.7 g/t Au has been estimated for an underground mining operation, the development of which commenced in June 2004.

Exploration tenements adjacent to Paulsens: Seven exploration licences, one mining lease and a prospecting licence adjacent to the Paulsens' tenements covering an area of 206 km².
Ashburton exploration tenements: Four exploration licences and five mining leases in the Mount Clement and Metawandy Creek areas covering an area of 741 km². A "non-JORC compliant" resource estimate has been reported for Mount Clement. NuStar has farmed into one exploration licence of 76 km² held by Red 5 Pty Ltd.
Cue region tenements: The Emily Well group of prospecting licences near Cue in the Murchison district covering 1990 ha.

The most significant mineral asset is the Paulsens Project. NuStar has not completed a documented feasibility study although many of the elements of such a study are complete and a decision to proceed with project construction was made on that basis in October 2003.

NuStar also holds Exploration Licence applications over 79 km² in the Ashburton region and applications for mining leases covering 171 km² in areas held under exploration licence in the Paulsens area. No additional value has been assigned by AMC to the applications.

In the same area, SBM is farming into a group of tenements referred to as the Pelican Joint Venture. AMC understands that SBM's rights and obligations in the joint venture will be transferred to NuStar at a future date. NuStar has no effective interest in the tenements at the valuation date.

$3.2$ Tenements

Tenements held by NuStar are listed in Appendix A. In addition to these tenements, NuStar has a joint venture with Red 5 Limited over an exploration licence of 76 km² and submitted an exploration licence application of 79 km² in the Ashburton region and mining lease applications covering 171 km² adjacent to Paulsens.

An independent title specialist, Resource Mapping Pty Ltd, was engaged by SBM to review the standing of the material tenements of NuStar. The tenements selected for review were the tenements covering and adjacent to the Paulsens project (M08/99, M08/196, E08/665). The report concluded that the tenements were in good standing.

NuStar has an agreement with the Puutu Kunti Kurrama and Pinikurra People ("PKKP") which includes payment of a royalty on gold production from the Paulsens' tenements. The agreement also allows for SBM to issue shares to PKKP on the basis of production from the Paulsens project. The share issue does not appear to have an impact on NuStar.

The total annual expenditure commitment on granted tenements is currently \$0.82M.

$3.3$ Valuation Methods

$3.3.1$ Paulsens Project

A resource model has been prepared for the Paulsens Project and NuStar has carried out studies at a feasibility study level for mine design and scheduling, mine capital and operating costs and capital and operating cost estimates for the proposed plant and infrastructure. Metallurgical test work has been undertaken and analysed and geotechnical assessments have been prepared.

The Australian Securities and Investment Commission ("ASIC") Practice Note 43 discusses alternative valuation methodologies including the discounted cash flow ("DCF") method. We have used the DCF method to value the Paulsens Project which is the usual and industry-accepted approach used to estimate a Technical Value for operating mines or mining projects close to development or for those mining projects where sufficient data exist to reasonably enable application of the DCF method.

NuStar has prepared production, revenue and life-of-mine ("LOM") cost schedules for the Paulsens Project operation which have been reviewed and modified as considered appropriate by AMC which has then calculated a net present value ("NPV") of the scheduled cash flows by discounting the cash flows at a discount rate provided by Deloitte.

The production schedule is based on the June 2004 resource model, mine designs and the conversion of existing resource estimates to ore reserves for a mining inventory that can be reasonably expected. The NuStar life of mine schedule extends for approximately six years.

The exploration potential outside the "near-mine" area of the Paulsens Project has been separately considered in valuing NuStar's exploration portfolio.

Sensitivity analysis of the DCF model to variations in gold price, grade, cost and discount rate was carried out

The key economic and financial assumptions upon which AMC's valuation of the Paulsens Project are based on:

Planning Horizon

AMC has prepared the estimated revenue and cost schedules in terms of 2004 dollars. The actual revenues received and costs incurred will depend on the timing of project implementation and operation. AMC's schedules are based on detailed engineering design, construction and operation proceeding without delay after commencement of project implementation. Should, however, there be a significant delay during project implementation, then AMC's NPV assessment of the Paulsens Project would be impacted.

Gold Price

On instruction from Deloitte, a gold price of US\$418 per ounce and exchange rate of US\$0.72/A\$1.00 were adopted giving an Australian dollar gold price of \$580.56 per ounce.

Government Royalty

Royalty in respect of gold production in Western Australia is payable to the Western Australian Government under the Mining Amendment Regulations (No. 4) 1997. Accordingly, AMC has applied the following government royalty rates in its schedules:

2.5% of the realised value of the gold metal produced
no royalty is payable on the first 2,500 ounces of gold produced in each year.

Other Royalties

$\overline{\phantom{a}}$	SBM Royalty:	5.0% of the realised value of the gold metal produced. No royalty is payable on the first 6,000 ounces of gold produced.
$\sim$	PKKP Royalty:	\$2 per ounce for each ounce of gold metal produced.

Capital and Operating Costs

All cost estimates are in 2004 Australian dollars (refer to Section 3.5 of this report for details).

Corporate Costs

NuStar's off-site corporate costs are excluded from AMC's valuation.

Working Capital

AMC has not made any allowance for provision of working capital in its cost estimates.

Resource Definition

No resource definition expenditure has been incorporated into AMC's schedule.

Closure Costs

It is assumed that rehabilitation costs at the end of mine life (\$0.8M) are offset by the salvage of plant and other asset sales.

Discount Rate

AMC's cash flows have been discounted at a base case real discount rate of 9% per annum as instructed by Deloitte.

$3.3.2$ Exploration Portfolio

The valuation of exploration projects, particularly those for which it is not possible to quantify any resources, is very subjective. There are, however, several generally accepted procedures to value exploration projects and we have used such methods as appropriate to arrive at balanced judgements of value. These methods are outlined in Section 2.1 of this report.

Where possible, we have attempted to use more than one method before selecting, from the range of values so derived, the valuation assessment appropriate to that project. Values have been rounded, outliers in contributing estimates sometimes excluded and usually, because of the subjectivity, the mid point of the value range has been chosen as the Preferred Value.

3.4 Paulsens Project - Geology and Resources

The Paulsens group of tenements consists of two Mining Leases (M08/99 and M08/196) over the Paulsens Project and one exploration licence (E08/665) covering about 83 km². The Paulsens mining leases are the most important mineral assets as they cover the Paulsens Project where an Indicated and Inferred Resource of 1.44 Mt grading 11.7 $g/t$ Au for 541,000 ounces has been reported.

3.4.1 Geology

The Paulsens Project lies on the northern limb of the Wyloo Dome, a doubly plunging anticline with a northwest trending axis. Archaean granite and mafic volcanics in the core of the dome are unconformably overlain by Proterozoic metavolcanics and metasediments of the Fortescue Group. The metasediments are predominantly sandstone and argillite that is variably carboncaeous, calcareous and pyritic with some arenitic layers.

In the Paulsens area, poorly outcropping arenites, siltstones and pyritic black shales are intruded by gabbroic intrusives. The sediments (the Melrose Argillite) are part of the Hardey Formation of the Fortescue Group and are overlain by vesicular basalt of the Mt Jope Volcanics.

Gold occurs in quartz-carbonate-sulphide veins associated with the Melrose Fault Zone. Veins occur within and along the margins of a gabbro dyke that intrudes the Fortescue Group and appear to post-date the dyke. The veins range from a few centimetres up to several tens of metres thick and plunge to $335^{\circ}$ AMG at about $25^{\circ}$ to $30^{\circ}$ . Gold is associated with massive and vein pyrite with minor pyrrhotite and chalcopyrite. The strongest development of gold-bearing sulphides is along the upper and lower contacts of the dominant quartz vein. The quartz vein set is about 350m wide and extends over 1000m down plunge.

The metasediments, gabbro and quartz veins are cut by steeply southwest-dipping dolerite dykes oriented at 322° AMG, which are not mineralised. Pyritic carbonaceous black shale may occur at the footwall contact of the dominant quartz vein.

Silicification and quartz carbonate veining occur in rocks adjacent to the quartz veins.

Weathering typically extends to around 30m below surface in the area of the Paulsens deposit.

$3.4.2$ Previous Exploration

The Paulsens mine (also known as Melrose mine) was mined between 1936 and 1940 and produced 3,000t at an average grade of 9.7 g/t Au.

Between 1987 and 1992 a number of companies carried out drilling programmes targeted at the nearsurface expression of the Paulsens vein. Drilling was mainly reverse circulation with some diamond drilling. Some data from some of the early drilling are unreliable because of uncertainty about assay quality control, downhole surveys and collar positions.

NuStar has carried out a number of drilling programmes since 1995, consisting of RC and diamond drilling and has prepared several resource estimates. The latest drilling programme was carried out in 2004 consisting of 55 drillholes for 15,000m drilled targeted at down plunge extensions of mineralisation.

In 1999, Indicated and Inferred Resources of 2.57 Mt grading 7.5 $g/t$ Au for 621,000 ounces of contained gold reported at a 3 g/t Au cut-off which were being evaluated as an underground mining opportunity. After SBM acquired control of NuStar in 2001, a Measured, Indicated and Inferred Resource of 3.97 Mt grading 4.5 g/t Au for 574,000 ounces of contained gold was reported at a 1 g/t Au cut-off and was being evaluated as an open pit mining opportunity.

In 2003, a plan was developed to assess the underground mining potential. The resource was reported as 675,000t grading 15.7 g/t Au for 341,000 contained ounces of gold at a 4 g/t Au cut-off. This estimate was classified as Inferred Resource because of lower confidence in the continuity of the higher grade being targeted for underground mining. A further drilling programme completed in 2004 has resulted in the current Indicated and Inferred Resource estimate of 1.4 Mt grading 11.7 g/t Au for 541,000 ounces of contained gold reported at a 4 g/t Au cut-off.

The June 2004 resource estimate is the latest publicly reported and has been used for project implementation. Decline development to access the mineralisation was started in July 2004.

$3.4.3$ Data Collection

NuStar has used drillhole data from previous tenement holders as well as reverse circulation ("RC") and diamond drilling carried out by NuStar since 1995. Table 3.1 indicates the proportion of drillhole types used for the 2004 resource estimate.

Drillhole Type	Drillholes in Database		Drillholes in Resource Estimate
	No of Holes	Metres of drilling	No of Holes	Metres of drilling
Rotary Air Blast	169.	5.783
Reverse Circulation	355.	47.277	171	25,209
Diamond Drillhole ¹	127	32.911	94	23,655
Total	651	85.911	268	48,949

Summary of Paulsens Drilling Table 3.1
--------------------------------------------------	--

^1. including reverse circulation drillholes with diamond tails.

Table 3.2 shows the proportion of data within the lode wireframes for each sample type.

Table 3.2		Proportion of Sample Types
-----------	--	-----------------------------------

Lode	Assays from Reverse Circulation Drillholes	Assays from Diamond Drillholes ¹
Upper Lode	641	526
Lower Lode	375	220
Total	1.016	746

¹ including diamond tails to reverse circulation drillholes.

About 70% of the data available for resource estimation comes from diamond drillholes or diamond drilled tails to RC holes.

Drillholes are collared on 25m-spaced sections and most drillholes are drilled vertically or at an orientation to intersect the mineralised zone at a high angle. Angled holes have been drilled in reverse directions to validate interpretation. Drillhole spacing at the puncture point on the lode can vary widely due to hole deviation. The part of the Upper Lode classified as Indicated resource is drilled to an average spacing equivalent to 22m, although the shallower part is more closely drilled to 12.5m with spacing increasing down plunge.

Drillhole collars have been surveyed using differential Global Positioning System equipment. Down-hole surveys for dip and azimuth using down-hole survey cameras were run on most drillholes. Minor interpretation errors could occur where drillholes are assumed to be straight in the absence of surveys.

RC drillholes were drilled using a face-sampling hammer. One-metre intervals were sampled in mineralisation by splitting the full sample with a riffle splitter. Samples with no sulphides were collected over 1m intervals and spear sampled to produce 4m composites. Intervals that return with anomalous results were resubmitted using the residues at one metre intervals. RC samples were generally dry.

Diamond drillholes were HQ and NQ diameter core which was split to half core in 0.5m sample intervals in the mineralisation and to quarter core in 2m sample intervals outside mineralisation. Drillholes drilled for geotechnical purposes were HQ diameter. All diamond drillholes were oriented using the spear technique. Diamond drilling provided good sample return.

Samples from NuStar drilling were analysed using fire assay with an AAS finish.

Different assay quality control programmes have been conducted during the various drilling campaigns These include:

Analysis of laboratory duplicates and standards
Analysis of RC duplicate samples
Assay of prepared standards
Check analyses by umpire laboratories on pulps for the highest-grade samples.

Results are generally acceptable.

Samples from the first 27 holes drilled by NuStar were analysed for gold and a suite of other metal elements. No values were considered to be significantly high in elements other than gold and subsequent drillholes were only analysed for gold.

Rock density determinations have been carried out on 493 drill core samples using a water immersion method. The rock density could be related to the sulphide content and in previous resource estimates this relationship was used to model density. For the 2004 model, the resource consultant concluded that the relationship was inadequately demonstrated to allow modelling of density.

$3.4.4$ Resource Estimate

The 2004 resource estimate was developed by consultants Resource Evaluations Pty Ltd ("REPL") based on interpretations by NuStar geologists in conjunction with REPL. Three-dimensional wireframes were prepared for the quartz vein, lodes, gabbro and dolerite dykes.

The lodes have been interpreted on sections on a local grid. Lode boundaries are based on a combination of sulphide content and grade. Domaining on sulphide content alone was seen to incorporate a significant volume of low-grade material. The interpretation nominally used a 2 $g/t$ Au cut-off but position in relation to the vein, continuity and sulphide content were primary criteria.

The interpretation forms two prominent lodes (Upper and Lower Lodes) broadly associated with the upper and lower contacts of the quartz vein. A number of small discontinuous mineralised zones occur adjacent to the Upper and Lower Lodes. The Upper Lode is more continuous than the Lower Lode and tends to have higher sulphide content but lower gold grade than the Lower Lode. Some selected drillhole intercepts include significant intervals of very low grade in order to maintain continuity. This will be reflected in the estimated grade but smaller tonnages at higher grade may be mined in these areas.

The interpretation of the Upper Lode has been continued down-plunge until it is closed out by four drillholes. The Lower Lode is thinning at lower grade and does not appear to have further down-plunge continuity.

The lode thickness and grade vary significantly over short distances. The interpreted lodes reflect the overall geometry and volume of the mineralisation but are unlikely to correctly reflect the local distribution of mineralisation.

The volume model has a parent cell size of 10 mE $x$ 5 mN $x$ 5 mRL which approximates half the drillhole spacing in the east direction and about one quarter of the drillhole spacing in the north direction. AMC considers that the north dimension is low considering the drillhole spacing and grade variability. Where grade is highly variable, it can only be estimated with confidence into larger volumes. A small cell size compared to data density will result in an over-smoothed grade tonnage curve. Small tonnages at high grade will be apparent in the model that may not be identifiable in mining.

The coefficient of variation of raw sample data is 2.2 in the Upper Lode and 2.3 in the Lower Lode indicating a high degree of data variability. REPL has not carried out variographic studies. AMC would expect variograms to indicate a high nugget effect and short ranges, reinforcing the need to estimate into larger volumes.

Grade was estimated into the block model using inverse distance squared estimation. Model grades were only estimated using data within each lode. Top-cuts were applied on a lode basis to limit the effect on the estimated grade of small numbers of extremely high values. The top-cut values of 70 g/t Au, 100 g/t Au and 50 $g/t$ Au for Upper, Lower and Other Lodes respectively were interpreted from statistical plots.

An anisotropic search ellipse oriented in the plane of the lodes was used for grade estimation with a primary radius of 50m with subsequent pass of 75m. The anisotropic ratio was 1:3:8 for the major, semimajor and minor axes respectively. AMC considers that the anisotropy is harsh and estimation in the semi major direction will be strongly influenced by the nearest drillhole. A broader anisotropy would result in a smoother estimate and more reliable tonnage and grade estimate above cut-off.

Volume models of gabbro and dolerite were developed and where these models intersected the lode model, gold grade was set to zero.

REPL has classified the resource estimate on the basis of drillhole spacing and confidence in the overall geological interpretation of lode continuity and grade estimation. The Upper Lode is classified as Indicated Resource with the exception of the down-plunge extent where drillhole spacing is greater than about 25m and some outlying elements of the lode that are classified as Inferred Resource. The Lower Lode is classified as Indicated Resource some outlying elements of the lode that are classified as Inferred Resource. Other Lodes are mainly classified as Inferred Resource.

Table 3.3 shows the June 2004 resource estimate reported according to the JORC Code and at a cut-off of 4 g/t Au.

Lode	Indicated Resource		Inferred Resource			Total Resource
	Tonnes	$g/t$ Au	Tonnes	$2/t$ Au	Tonnes	$g/t$ Au	Au Ozs
Upper	750,000	10.6	114,000	8.1	864.000	10.3	285,000
Lower	472.000	14.8	57,000	8.9	529.000	14.2	241,000
Other	000.1	5.9	45,000	10.2	46.000	10.1	15,000
Total	1.223.000	12.2	216,000	8.8	1.439.000	11.7	541,000

Table 3.3 Paulsens Mineral Resource Estimate - June 2004

This estimate represents an increase of 60% in total resource contained ounces of gold compared with the high grade 2002 estimate of 688,000t grading 15.6 g/t Au. This is mainly attributable to extensional end infill drilling and the approach used for interpretation that considered the geological continuity of mineralisation rather than a strict grade domain.

3.4.5 Comment on Data Collection and Resource Estimation

The collection of data for resource estimation at Paulsens has generally been to good industry standard, however a number of issues in data collection and resource estimation indicate risks in the resource estimate, namely:

the proportion of diamond drillholes available for interpretation and estimation increased significantly in 2004. A high-grade deposit of this type with highly variable thickness and grade needs high quality sampling and geological information for reliable resource estimation

the lode boundaries are highly variable and for some drillholes, alternate interpretations are equally likely. Some selected drillhole intercepts include significant intervals of very low grade in order to maintain continuity. Local estimation of tonnage and grade may have low confidence
for pre-2004 drillholes, down-hole surveys were not available for all holes. Holes that are surveyed can show significant deviation. This provides some locational risk for lode boundaries
the model parent cell size, grade estimation method and anisotropy may not be appropriate for confident local grade estimation in a deposit with very high variability. The model is suitable for long-term planning but short-term grade and tonnage are likely to be more variable than the model indicates. Closer spaced drilling from development headings will be necessary for short term scheduling and stope design
below about 1000 mRL drillhole spacing is generally wider than up-plunge and parts of the model with very high grade $(>15 \text{ g/t}$ Au) appear to be more continuous. This may be an artefact of drillhole spacing and the distribution of this material may be less continuous than it appears in the model.

The resource estimate has been classified and reported in accordance with the JORC Code. AMC agrees with the classification of Indicated and Inferred Resources. The resource below 1000 mRL is appropriately classified as Indicated Resource but confidence in local grade and tonnage may be less than Indicated Resource up-plunge. AMC considers that achievement of a classification of Measured Resource would be unlikely based on surface drilling only.

3.4.6 Potential for Extensions and Upgrades to the Resource

Part of the Paulsens resource estimate has been classified as Inferred Resource in the down-plunge part of the estimate where drillhole spacing is wider. The lode in the Inferred Resource is thinner and of lower grade than the adjacent Indicated Resource. The Upper Lode down-plunge of the Inferred Resource and the Lower Lode appear to be closed off by drilling. It is likely that the part of the Inferred Resource can be upgraded to Indicated Resource with the completion of further drilling. Minor contributions may also come from small discontinuous mineralisation in the Other Lodes.

AMC has not included any additional resources beyond the Indicated Resource in its valuation.

$3.5$ Paulsens Project - Operations

NuStar has compiled an underground mining Ore Reserve for the Paulsens Project. The Reserve estimate has been based on a Resource estimate prepared by REPL in June 2004. LOM development, production and cost schedules have been compiled by NuStar, detailing the mining of the Reserve estimate.

A mining contractor was mobilised to site in July 2004, a decline portal has been excavated and development of a decline to access the underground mine has commenced. AMC's valuation of the Paulsens Project is based on an underground production schedule comprising 1.2 Mt of ore grading 10.7 g/t Au.

During the first nine months of underground development, detailed engineering design and construction of the treatment plant and infrastructure is programmed to be completed. The treatment plant is scheduled to commence commissioning in May 2005. A stockpile of approximately 25,000t of ore from development is scheduled to be available for mill feed at the time of commissioning the treatment plant. Production from underground stoping is scheduled to commence the following month.

The ore is reasonably hard and will require fine grinding. Run of mine ore will be fed into a two stage crushing circuit, before entering the grinding circuit comprising a single stage ball mill and a gravity concentrator, followed by a carbon in leach ("CIL") operation.

$3.5.1$ Mining

As described earlier in this report, REPL prepared the resource model upon which the Paulsens Project mining Reserves and LOM schedules are based. An earlier optimisation study undertaken concluded that the resource would be economically better exploited by underground rather than open pit.

NuStar prepared an underground mine design and production schedule which is based on mining of Indicated Resources in the resource model created by REPL. Therefore, all the material which is included in the production schedule qualifies as ore reserves under the JORC Code.

The resource model indicates an extension of the upper ore zone below the base of the Indicated Resource at 900 mRL with surface at about 1200 mRL. All of this material is classified as Inferred Resource. AMC has not included any of this material in the LOM schedule as both the thickness and the grade of the Inferred Resource is reducing below the 900 mRL.

Design

The design parameters used in the determination of the Paulsens underground mining Reserve and used by AMC for valuation are:

$\overline{\phantom{a}}$	Access Decline:	5m wide by 5.5m high at a gradient of 1 in 6
$\mathbf{u}$	Level Access Development	4.5m wide by 4.8m high
$\mathbf{u}$	Level Development:	4.1m wide by 3.8m high with a shanty back
$\mathbf{u}$	Ventilation Rises:	3.5m diameter raisebore and $4.5m \times 4.5m$ longhole

raises.

AMC has reduced the quantity of raiseboring and long hole rising relative to that allowed in NuStar's LOM plan to reflect the ventilation layout currently under evaluation.

Geotechnical

The geotechnical mine design procedures have been assessed by NuStar and its consultants. Recent analyses have been undertaken using logging data, intact rock test results and assumed stresses. This data has been used to derive stope spans and pillar dimensions used by NuStar in the estimation of Reserves. The input parameters and stope/pillar dimensions are reasonable in AMC's opinion.

The risk of dilution from the hanging wall and footwall of stopes has been addressed by including the following:

0.2m to 0.4m overbreak on the hangingwall
0.1m to 0.15m overbreak on the footwall

to allow for either ground conditions or stope drilling accuracy or a combination of both.

Stoping

Longhole stoping has been considered as the preferred mining method. It is to be applied in the steep (45° dip) sections of the resource and in flatter (30° dip) stopes where the ore is more uniform. It will be used to extract 68% of stoping Reserves

Jumbo stoping, or room and pillar mining will be used in the flatter $(< 30^{\circ}$ dip) portions of the orebody. This method will be used to extract 29% of stoping Reserves
Handheld (airleg) mining will be used to extract small high-grade zones not practical to mine by mechanised methods. Handheld mining will be used to extract 3% of stoping Reserves
Stoping is currently planned to commence on the 5 Level (1075 RL), where the tonnes per vertical metre is greatest. Over the life of the mine, stoping will extend from a top of around 1180 RL (surface is at ~1200 RL) down to around 900 RL, i.e. a vertical interval of some 280m.

The deposit geometry, rock types and stoping method and sequence are such that it is considered that no backfill will be required.

Schedule

The following is a summary of the production schedule:

$\sim$	Underground:	1.2 Mt grading $10.7$ g/t Au. This estimate is based on the Paulsens underground mining Reserve estimate prepared by NuStar
$\overline{\phantom{a}}$	Total Mined and Treated:	1.2 Mt grading $10.7 g/t$ Au with a LOM average metallurgical recovery of 93.38% at a nominal treatment rate of 250,000 tpa
	Mine Life:	Approximately 385,000 ounces of gold; ore treatment commencing in Year 1 and completed in Year 6.

The LOM schedules prepared by NuStar are based on a nominal underground ore production rate of 250,000 tpa. This requires an underground advance rate of approximately 58 vertical metres per annum ("vmpa"). AMC considers that this is sustainable.

Costs

AMC has adopted the following mining costs for a 250,000 tpa production rate from the 'Paulsens' Equity Model Spreadsheet' NuStar (2004), compiled by NuStar. Mining costs are based on actual rates from the mining contractor currently on site:

$\overline{\phantom{a}}$	Underground capital cost	- equipment - development	\$0.5M \$22.9M
$\mathbf{u}$	Underground operating cost		$$66.8M ($56/t)$ .

The underground capital development cost provisions includes pre production capital costs for the mining department. All waste development is included in the capital cost.

Project Development

For valuation purposes, AMC has applied the project implementation programme as detailed in the LOM schedules compiled by NuStar, i.e.:

ALC	Project construction and commissioning	2004
AMER	Production start up	Early 2005.

$3.5.2$ Treatment

A report has been prepared for NuStar by others, estimating capital and operating costs for a treatment plant to process ore at the Paulsens Project. The study is based on the following parameters resulting from metallurgical test work.

Metallurgical Test Work

Metallurgical testwork has been carried out on samples from the Paulsens deposit and the metallurgical characteristics listed below have been identified. The ore is reasonably hard but falls within the normal range for reasonably hard competent material.

Comminution parameters include:

$\overline{\phantom{a}}$	Unconfined Compressive Strength	Range 27-212 Mpa Design 183 Mpa
	Rod Mill Work Index	Range 10.9-20.1 kWh/t Design 14.7 kWh/t
	Ball Mill Work Index	Range 14.2-19.1 kWh/t Design 18.5 kWh/t
	Abrasion Index	Range 0.23-0.33 Design 0.26.

The ore will require a fine grind of 80% passing 53 micron for satisfactory cyanide leach recovery. Given the relatively competent nature of the ore, this will result in a relatively high power consumption and thus cost in the grinding circuit. Grinding media consumption will also tend to be relatively high.

The cyanide leach recovery is good provided the grind size is appropriate. Recoveries from 92-94% were generally achieved. There is no indication of any refractory component in the ore samples tested. Some of the ore samples contained preg-robbing carbonaceous material but operation under CIL conditions largely overcame this potential problem and overall recovery should be satisfactory.

The ore does contain cyanide soluble nickel and copper in some areas. This will have the effect of increasing cyanide consumption. In addition, the loaded carbon will have to be treated with a hot acid wash to remove nickel complexes and a cold cyanide wash to remove copper complexes.

The reagent consumption in the leach circuit will be relatively high with lime consumption ranging from 1.4-4.0 kg per tonne ore and cyanide from 0.5-2.1 kg per tonne ore. Operating costs for lime and cyanide have been calculated based on consumptions of 2.6 kg per tonne and 1.2 kg per tonne respectively.

The high sulphide ore blend will be an oxygen consumer so that an addition of oxygen will be required to maintain a satisfactory dissolved oxygen level in the CIL leach circuit.

Viscosity tests indicate that the leach tank operations will be standard.

Plant Design

Run of mine ore will be crushed from 550 mm to 100% passing 16 mm and 80% passing 12mm in a two stage crushing circuit.

The primary crusher will be an 800 mm x 1 000 mm $(32" \times 40")$ single jaw crusher powered by a 110 kW drive. The secondary crusher will be a 5.5 foot Symons cone crusher (or equivalent) fitted with a 185 kW drive. The capacity of the crushing circuit will be 125 tph which will comfortably handle the required annual throughput of 250,000t.

The grinding circuit will consist of a single stage ball mill 3.51m in diameter by 5.63m long, fitted with a 1,000 kW drive motor. The mill will operate in closed circuit with three 250 mm cyclones (two operating, one on standby). The grinding circuit will operate 24 hours/day, 365 days per year at a rate of 31 tph which will achieve the required throughput of 250,000 tpa with a mill utilisation of 93%. As noted, a relatively fine grind of 80% passing 53 micron will be required.

The comminution circuit also incorporates a gravity concentrator that will be a Knelson KC20 or equivalent.

Product from the comminution circuit will be thickened to 50% solids in a 7.0m diameter High Rate thickener prior to the cyanide leach circuit.

The cyanide leach circuits will consist of $7 \times 150m^3$ leach reactors operating in CIL configuration. The total residence time in the leach circuit will be approximately 24 hours. Oxygen will be injected into the CIL feed and the first three CIL reactors as required.

Gold will be recovered from pregnant carbon in a split AARL elution circuit. This circuit will incorporate a hot acid wash to remove nickel complexes and a cold cyanide wash to remove copper complexes. Gold will be electrowon from the AARL eluate before smelling and pouring of bullion.

Leached solids will be pumped to the tailings dam. The tailings will have a high pyrite content and will be potentially acid forming and so some provision for a low permeability liner will be required to minimise seepage of potentially acid water from the dam. NuStar's consultants have carried out testwork at site and made recommendations regarding the construction of the tailings dam to address the potential seepage of acid water. Provision will also be made to add hydrogen peroxide to the tailings stream to reduce the cyanide concentration in the dam if the necessity arises.

Water Supply

Water will be sourced from mine dewatering water and bore water is also available if required. Potable water will be supplied from a reverse osmosis plant.

Power Supply

Power will be purchased from a contractor who will supply and operate a suitable power station at site. NuStar has calculated power consumption and power generation costs for the Paulsens Project, based on the LOM plan. The average cost of power calculated is 16.1 cents/kWh. Power costs are susceptible to increases in world oil prices, exchange rates and any changes to the Diesel Fuel Rebate.

Capital Cost

NuStar has previously engaged other consultants to prepare a capital cost estimate for the Paulsens plant. The estimate includes a contingency of 5% and assumes that some second hand equipment is available and will be used. Allowance has been made for refurbishing and relocating second hand equipment.

The capital cost estimate included in this report is comparable to the capital cost estimate prepared by NuStar and included in NuStar (2004). The capital cost estimate for the processing plant as used in the valuation is set out in Table 3.4.

Area	Estimate
	SM
Mob/Demob Crushing Plant	0.55
* Processing Plant	10.50
Lab & Equipment	0.15
Tailings Dam	1.00
First Fills	0.35
Total Capital Cost for Valuation	12.55

Table 3.4 Treatment Plant and Infrastructure Capital Costs

* includes a contingency of 5%.

The processing plant capital estimate listed in Table 3.4 includes ore storage, grinding and classification, plant piping, CIL, elution gold recovery, reagents, power reticulation, earthworks, water storage and reticulation, tailings, tailings decant, air compressors, plant buildings, workshop/store, engineering, metallurgical and commissioning, contractor mobilisation.

Contractors will carry out all crushing activities. Capital costs for mob/demob of crushing plant are included in the processing plant capital costs. The capital cost for crushing facilities has been removed from the estimate prepared by NuStar's consultants.

Costs for the following items which form part of the infrastructure for the processing plant have been included in either the mining or administration capital or operating cost estimates:

borefield development
light vehicles L
mine dewatering ponds
office furniture
communication equipment
insurance.

The NuStar LOM schedules did not include any sustaining capital. An allowance of \$0.40M per annum, which is approximately 5% of the processing plant operating cost has been included as sustaining capital. AMC estimates that this allowance will cover for new equipment, replacements, etc, site wide.

Operating Costs

The operating cost estimate for the processing plant, as prepared by others for NuStar was based on a production rate of 250,000 tpa. This cost estimate has been updated by NuStar and is detailed in Table 3.5.

Area	Unit Cost
	\$/t
Plant:
Salaries & On Costs	7.92
FIFO/Accommodation	1.90
Maintenance	1.46
Consumables	7.68
Misc Fixed Costs	0.73
Contract Crushing	6.47
Power	7.71
LOM Average Cost per Tonne	33.87

Fable 3.5	Processing Plant Operating Cost Estimate - 250,000 tpa

The total plant operating cost estimate of \$33.87 per tonne is accepted by AMC as being reasonable for the size of the plant.

3.5.3 Administration

The administration cost estimate as prepared by NuStar is detailed in Table 3.6. AMC has reviewed this estimate and considers it to be reasonable.

Area	Unit Cost \$/t
Administration:
Salaries & On Costs	3.55
FIFO/Accommodation	1.11
Camp/Office Fixed Charge	3.48
Light Vehicles	0.67
Communications/PABX	0.77
Software Leases/Licenses	0.11
Miscellaneous Costs	1.93
Power	1.88
LOM Average Cost per Tonne	13.50

Table 3.6 Administration Operating Cost Estimate - 250,000 tpa

3.5.4 Total Costs

Based on AMC's production schedule, the unit costs for a 250,000 tpa rate are:

$\bullet$	Operating cost per ounce produced	A\$316/oz
$\bullet$	Capital plus operating cost per ounce produced	$A$431/\sigma z$ .

3.6 Environment and Social

A Notice of Intent ("NOI") which applies to the proposed mining and ore treatment activities on Mining Leases M08/99 and M08/196 was approved by the State Mining Engineer in 2002. NuStar has been granted a general purpose licence to cover a permanent camp and three miscellaneous licences to cover the camp borefield, a pipeline to the borefield, an access road, airstrip and gas pipeline corridor.

Formal updated descriptions of the project have been sent to local station leaseholders and Decision Making Authorities including the Shire of Ashburton, the Department of Environment ("DOE") and Main Roads of Western Australia. Contact has also been made with the Department of Conservation and Land Management, the Department of Indigenous Affairs and the Office of Energy.

Significantly, the DEP (now Department of Environment) has advised NuStar that the proposed project will not require formal assessment by the Environmental Protection Authority and that the project will be administered under the Works Approval and Licensing provisions of Part V of the Environmental Protection Act, 1996 and Regulations. Licensing of the project is currently being undertaken in two stages with Works Approval for Stage 1 (Mining) issued and Works Approval for Stage 2 (Processing) being processed.

The NOI did not identify any flora or fauna or communities that will require special attention or management.

NuStar's environment management commitments will include:

establishment of landforms during rehabilitation of the project area to re-establish a land use consistent with the current land use. All topsoil will be stockpiled for rehabilitation
water of good quality will be used within the operation. Water management will cater for underground dewatering, recycling of decant water from the tailings dam and prevention of seepage from the tailings dam
all waste products, including sewage and domestic waste, will be managed according to appropriate guidelines of DOE and the health requirements of the Shire of Ashburton and Health Department of Western Australia. Dangerous goods and hazardous substances will be managed during transportation and storage to meet all occupational health and safety requirements
an Environmental Management Plan consistent with the principles of ISO 14000 will be developed and documented during the first operating year of the project to facilitate continual improvement throughout the life of the project.

3.6.1 Consultation

The project area does not contain any sites of European heritage. Following further surveys with Native Title Claimants in 2002, Section 18 advice has been granted by the Minister for Indigenous Affairs for the removal of several sites in the Project area.
Two station owners will be affected by the project. Both owners are aware of the project and are being kept informed by NuStar as the project progresses. The Shire of Ashburton is also aware of the project and will be kept informed.

3.7 Exploration Tenements

$3.7.1$ Tenements Adjacent to Paulsens

Exploration tenements adjacent to Paulsens include seven exploration licences, one mining lease and one prospecting licence covering an area of 206 km². Applications for mining leases cover areas previously held under exploration licences. They include the Belvedere prospect which is covered by Mining Lease M08/222. The tenements cover Archaean rocks that host the Paulsens deposit and the north-western and south-eastern extensions of the structure controlling the Melrose Fault Zone. Anomalous surface geochemistry can be traced intermittently from Paulsens to the Belvedere workings.

Historic mining at Belvedere produced 1,585t of ore at 8.6 g/t Au and 1.3t of copper ore at 14.4% Cu. The mineralisation is hosted by two narrow steeply dipping quartz veins hosted by basalt, felsic volcanics, sandstone and conglomerate of the Mt Roe Basalt. The quartz veins strike north to north east and are related to a regional scale vein set that cuts across the Wyloo Dome and hosts geochemical anomalies at a number of locations.

In the 1990s, NuStar carried out surface rock chip sampling and drilled a number of RC drillholes adjacent to the old workings that indicated mineralisation extended over about 150m of strike length. The highest grade result reported was 4m at 16.83 g/t Au and the longest intersection reported was 12m at 6.27 g/t Au. AMC is not aware of a resource estimate for the Belvedere prospect.

The Tombstone prospect (also known as Blacks and Belfry) is located on a mining lease application over previously held exploration licence E47/902, about 8 km east of Paulsens. An adit was driven on extensive malachite staining in pyritic silica-carbonate altered sediments, felsic volcanics and minor basalt of the Fortescue Group. Dolerite dykes trending north northwest to northeast are common. The outcrop is capped by malachite stained cherty and quartz-veined silica, which may be due to silicification of quartzcarbonate-pyrite shears.

Intense alteration and anomalous copper in soils is traceable over about 400m and silica bodies have been identified over 4 km. Drilling by NuStar in 1999 intersected the major shear zone in oxidised material and pyrite-pyrrhotite-carbonate alteration in fresh rock in the footwall of the shear. Gold values were low

(about 0.2 g/t Au). The major shear remains untested in fresh rock. Exploration has tended to target historic prospects. Broader scale exploration is at an early stage.

Exploration Licence E08/906 to the west of Paulsens covers upper Hardey Formation stratigraphy with major and parasitic anticlines similar to those at Paulsens. Reconnaissance exploration involving geological mapping and rock-chip sampling has identified a north-west striking shear zone about 2.5 km long within the Fortescue Group. Rock-chip samples have returned maximum values of 0.7 $g/t$ Au, 0.8% Cu and 1.05% Zn.

Soil sampling over E08/1125 and E08/1186 has identified anomalous gold values in soils up to 180 ppb Au over an area of about 250m x 250m. The location corresponds with the cross-cutting of the Paulsens structure with the Mt McGrath Formation that hosts the Mount Olympus deposit near Paraburdoo.

$3.7.2$ Ashburton Exploration Tenements

NuStar holds exploration tenements in the Ashburton region to the south of Paulsens. The tenements fall into four groups:

the Mount Clement and Eastern Hills area
the Metawandy Creek area including the Papoose prospect
the Red 5 Joint Venture
the Meningee Well exploration licence.

$3.7.2.1$ Mount Clement and Eastern Hills Area

NuStar holds four mining leases (M08/191 to M08/194) and an exploration licence (E08/1256) covering the Mount Clement and Eastern Hills prospects and surrounding areas for a total area of 209 km².

The tenements cover part of the Ashburton Formation dominated by quartz muscovite schist and mudstone. Several north to north east trending dolerite dykes intrude the sedimentary sequence and are spatially associated with mineralisation at Mount Clement.

At the Mount Clement prospect, the Ashburton Formation consists of chert, dolomite, siltstone, sandstone, conglomerate and ferruginous breccia. Mineralisation is hosted by a fault-controlled ferruginous breccia with some mineralisation extending into the surrounding sedimentary rocks. The Mount Clement mineralisation was identified from a surface gossan in 1972 and subsequently explored over many years by geological mapping, soil and rock chip sampling, aeromagnetic, airborne radiometric and ground magnetic surveys. Drilling and costeaning identified that Au, Ag, Cu and As mineralisation occurred as discontinuous pods hosted by altered sedimentary rocks including dolomite, "silica dolomite", quartzmagnetite rock and black shale in a dominantly clastic sedimentary sequence. Some underground exploration was by adit was carried out.

Diamond and RC drilling has been carried out by a number of operators since 1978 and several resource estimates have been reported. In 1996 and 1997, NuStar carried out rotary air blast (RAB) and RC drilling at Mount Clement. The best RC drillhole result was 3m at $2.1$ g/t Au.

An estimate was publicly reported by NuStar in December 2002 of 550,000t grading 2.3 g/t Au and described as a "non-JORC compliant" inferred resource estimate. AMC notes that estimates that are not compliant with the JORC Code should not be publicly reported.

The Eastern Hills prospect is located about 1,500m southeast from the Mount Clement prospect. Soil and rock chip sampling identified mineralisation consisting of massive pyrite and arsenopyrite containing lead, antimony and silver at a lithological contact between sandstone and siltstone. RC drilling identified Au, Ag, Pb and Sb mineralisation over a strike length of 770m. The mineralisation is in a fault containing sulphidic pods containing pyrite, arsenopyrite, galena and antimony minerals hosted by schistose siltstone. The best results from the RC drilling was 1m grading 3.4 g/t Au, 105 g/t Ag, 29.5% Pb and 15% Sb.

An Inferred Resource of 607,000t at 2.4% Pb, 1.7% Sb has been estimated for the lead antimony occurrence. The estimate is not currently reported by NuStar. The estimate was a sectional area estimate interpreted on section using a lead/antimony equivalent cut-off. A minimum width of 1m on section was used with some internal dilution allowed. The interpretation was on irregularly spaced sections over 560m. Extrapolations from drillholes were up to 75m. An average density of $3.5$ t/m³ was used for tonnage calculations. The continuity of the mineralisation is not well defined.

The estimate is classified as an Inferred Resource. AMC agrees that the estimate is appropriately classified although it has reservations about it meeting the JORC Code requirement of a reasonable likelihood of ultimate economic exploitation because of the complex mineralogy.

One exploration licence (E08/1256) covering 177 $km^2$ is adjacent to the Mount Clement tenements. The Ashburton Formation in this area consists mainly of quartz-muscovite schist and mudstone with minor Duck Creek Dolomite. Part of this area was previously held by NuStar under other exploration licences.

Very little exploration has been carried out by NuStar in the exploration licence in the Mount Clement area. Exploration has concentrated on the Mount Clement prospect itself and the nearby Eastern Hills prospect.

The lack of regional exploration and no defined targets ranks these tenements at low to moderate prospectivity.

3.7.2.2 Metawandy Creek

Metawandy Creek consists of two exploration licences covering 123 km² encompassing the Papoose mining lease. The tenements cover clastic sediments of the Ashburton Formation and may be less prospective than tenements further north because of the absence of carbonate rocks. Very little exploration has been carried out on these tenements. The Papoose prospect is located on mining lease M08/189 and hosts gold anomalous quartz veins. Drilling has been carried out by previous operators without identifying significant mineralisation.

$3.7.3$ Red 5 Joint Venture

The joint venture with Red 5 Limited covers exploration licence E08/1287 of 76 km² adjacent to the Metawandy Creek tenements. The joint venture allowed for NuStar to earn 70% for expenditure of \$20,000 with a free-carried interest to feasibility study. NuStar has earned this interest. The tenement covers quartz-veined siltstone and sandstone over about 5 km of the Ashburton Formation. Previous RC drilling indicated peak values of 5m grading 2.5 g/t Au and 3m grading 15.6 g/t Au. NuStar has identified a gold in soil anomaly over 450m x 200m with values up to 1300 ppb Au.

3.7.3.1 Meningee Well Exploration Licence

The Meningee Well exploration licence covers 19 km² along strike from SBM's Pelican joint venture tenements. The tenement covers the contact between the Mt McGrath Formation and the Duck Creek dolomite that is being explored regionally for gold mineralisation. The Mt McGrath Formation hosts the Mount Olympus gold mineralisation at Paraburdoo. No exploration activity has occurred on this tenement.

3.7.3.2 Emily Well Exploration Project

The Emily Well project consists of a Mining lease application covering 8.1 km² in the Cue area of Western Australia. The applications cover expiring prospecting licences. The tenement covers Archaean greenstone belt rocks in the Meekatharra-Wydgee Greenstone Belt consisting mainly of felsic and mafic volcanics and dolerite. A dolerite unit on the western side of the tenements is considered prospective as it hosts gold mineralisation in a vein system associated with a shear zone at Emily Well to the south of the tenements. A dolerite unit in the eastern part of the tenements is considered to be equivalent to the Great Fingall Dolerite.

The only reported exploration activity on these tenements is a RAB/air core drilling programme carried out in November 1998. The programme encountered logistical difficulty but drilled 76 holes. A few assays were returned that were anomalous at 20 ppb Au with a maximum result of 150 ppb Au.

This project is at a basic exploration stage with no defined targets. Expenditure on the prospecting licences is \$44,000. The tenement has low to moderate potential for the discovery of a greenstone-hosted gold deposit of modest size.

3.8 Valuations

3.8.1 Paulsens Project - NuStar's Interest

AMC has determined a Technical Value for NuStar's interest in the Paulsens Project using the DCF method after considering sensitivities for:

Gold price
Grade
Costs.

AMC's DCF models are based on production and cost schedules, which include:

underground production of 1.2 Mt grading 10.7 g/t Au
total treatment inventory of 1.2 Mt grading 10.7 g/t Au with a LOM average metallurgical recovery of 93.38% to produce around 385,000 ounces of gold over a six year treatment operation
base case spot gold price of US\$418 per ounce for all production and an exchange rate of US\$0.72/A\$1.00
deductions for the royalty to St Barbara Mines of 5%, after the first 6,000 ounces of production, the PKKP royalty and the Western Australian State royalty
appropriate allowances for capital expenditure, operating costs, pre-production owner's costs, and underground diamond drilling costs for extension of resources, below the current Indicated Resource
a salvage value for plant and equipment and other project assets of \$0.8M, assumed to be equal to the operation's closure and final rehabilitation costs.

The results of our post tax DCF modelling with sensitivities are presented in Table 3.7. We have selected what we consider, given the Probable Ore Reserve classification and the current stage of implementation of the project, to be an appropriate range of sensitivities that cover underground grade, operating costs and capital costs which appear to be the key drivers of the project's economics. We have also included sensitivity to discount rate.

	Discount Factor (% pa)	$7\%$	9%	11%
Case No.	Case Name	Post Tax NPV	Post Tax NPV	Post Tax NPV
		\$M	\$M	-SM
	$+5\%$ Grade	22.9	20.0	17.5
2	$+2.5\%$ Grade	19.8	17.1	14.7
	-5% Cost	22.1	19.4	16.9
4	Preferred	17.1	14.6	12.3
5	$+5\%$ Cost	12.1	9.8	7.7
6	$\pm 10\%$ Cost	7.1	5.0	3.0
	$-2.5\%$ Grade	14.2	11.8	9.7
8	-5% Grade	11.3	9.1	7.1
0,	$-10\%$ Grade	5.4	3.5	1.8

Table 3.7 Post Tax Value of NuStar's Interest in Paulsens Project

The exploration data available at this stage is limited to that obtained from surface exploration drilling. Those data indicate that grade distribution within the mineralised zones can be expected to be variable.

AMC's experience is that as more detailed information comes to hand from underground development for relatively narrow and high grade deposits such as Paulsens, there is commonly greater local grade variability and structural complexity encountered than can be detected from the surface drilling. If a higher degree of variability is found than can be currently reflected, then the ore mined will often be of a lower grade, although possibly of somewhat higher tonnage than can be modelled from the exploration data. The possibility of the converse also exists but is less common in AMC's experience.

In recognition of that potential, we subjectively consider that if the actual production grade varies from the Preferred case values, then there is a greater likelihood that the grade will be lower rather than higher.

For valuation purposes, we have taken note of the sensitivities which show the potential impact on the value of the project. Having considered the sensitivities, we have used, for valuation purposes, our best judgement in selecting the following range of post-tax values for NuStar's interest in the project:

High value \$17.1M
Preferred value \$14.6M
Low value \$9.1M.

It should be noted that AMC's opinion as to these values may change in future with changes in gold price. exploration and other technical developments in regard to implementation of the project and factors which can affect its operation.

For sensitivity of the Post Tax Preferred case to gold price, refer to Figure 3.1.

3.8.2 Exploration Portfolio

Valuations of the exploration portfolio are listed in Table 3.8.

AMC understands that the Pelican joint venture between SBM and Pelican Resources NL will be transferred to NuStar at a future time but that at the critical date of this valuation, the joint venture was a mineral asset of SBM. No value has been attributed to NuStar.

Tenement Group	NuStar Interest	Value of NuStar's Interest
		Low	High	Preferred
	%	\$M	-SM	SM.
Tenements adjacent to Paulsens	100	0.56	0.78	0.67
Clement and Eastern Mount	100	0.32	0.45	0.38
Hills.
Metawandy Creek	100	0.18	0.25	0.22
Red 5 Joint Venture	70	0.08	0.10	0.09
Miningee Well	100	0.03	0.04	0.04
Emily Well	100	0.02	0.04	0.03
Total		1.2	1.7	1.4

Table 3.8 Value of NuStar's Exploration Assets

3.8.2.1 Licences Adjacent to Paulsens

Exploration tenements adjacent to Paulsens include seven exploration licences, one mining lease and one prospecting licence and include the Belvedere, Tombstone and Gossan Hills prospects. Recent information on exploration expenditure was not available for these tenements, however, AMC understands that activity since AMC's previous valuation in 2001 has largely been limited to soil sampling in the Gossan Hills area that would not contribute significantly to expenditure totals.

Drilling at the Belvedere prospect was successful in identifying gold mineralisation but AMC is not aware of a resource estimate. Exploration highlighted potential for gold mineralisation not associated with major quartz veins. Exploration in the Tombstone area has failed to enhance geochemical exploration results but anomalies from previous explorers remain untested. Exploration results from E08/906 E08/1186 indicate the presence of a significant regional scale structures carrying anomalous gold grades.

The expenditure on these tenements has enhanced their prospectivity. Expenditure to 2001 was \$507,000. AMC estimates that additional expenditure on aeromagnetic and soil surveys would be about \$50,000. A range of values of \$0.56M to \$0.78M is derived using this method and a PEM of 1.0 to 1.4 from 100% effective expenditure.

The value of the Exploration Licences adjacent to the Paulsens tenements is estimated at \$0.56M to \$0.78M with a preferred value of \$0.67M.

3.8.2.2 Mount Clement and Eastern Hills Area

Most exploration activity on these tenements has concentrated on the Mount Clement and Eastern Hills prospects. AMC is not aware of any exploration activity that has been carried out since June 1999. Current exploration expenditure information is not available. Exploration expenditure under previous NuStar tenements totalled \$0.49M in March 2001. There has not been any recent exploration activity. Most of this expenditure (estimated at 65%) was associated with delineating the Mount Clement and Eastern Hills resources and is considered to be effective exploration expenditure. A range of value of \$0.32M to \$0.45M is derived using a PEM of 1.0 to 1.4 from 65% effective expenditure.

A "non-JORC compliant" Inferred Resource estimate containing 41,000 ounces of gold was reported by NuStar in December 2002. A value of \$0.41M is derived using a Yardstick Value of \$10/oz for Inferred Resources.

An Inferred Resource of 607,000t at 2.4% Pb and 1.7% Sb has been estimated for Eastern Hills. The small resource of complex mineralogy at Eastern Hills is difficult to value using a Yardstick Value.

Considering the issues outlined above, the Mount Clement and Eastern Hills tenements are valued at \$0.32M to \$0.45M with a preferred value of \$0.38M.

3.8.2.3 Metawandy Creek

Very little exploration activity has been carried out on these tenements. Exploration expenditure information is not available. Using the value per unit area indicated by exploration and joint ventures on comparable ground in adjacent areas AMC estimates a range of values for NuStar's interest in the Red 5 tenement of \$0.18M to \$0.25M with a preferred value of \$0.22M.

3.8.2.4 Red 5 Joint Venture

The very low expenditure and joint venture arrangement for the Red 5 Joint Venture indicate a very low value for this tenement. Using the value per unit area indicated by exploration and joint ventures on comparable ground in adjacent areas AMC estimates a range of values for NuStar's interest in the Red 5 tenement of \$0.08M to \$0.10M.

3.8.2.5 Meningee Well Exploration Licence

No exploration activity has occurred on this tenement. The joint venture terms for the adjacent Pelican Joint Venture suggest a value of \$0.03M to \$0.04M for this tenement.

3.8.2.6 Emily Well

This project is at a basic exploration stage with no defined targets. Expenditure to December 1999 for the project is \$44,000. No additional expenditure has been incurred. A value of \$0.02M to \$0.04M with a preferred value of \$0.03M is placed on these tenements using a PEM of 0.5 to 1.0 on the total exploration expenditure.

3.8.2.7 Exploration Licence Applications

No value has been attributed to the exploration licence applications. The value of mining lease applications has been included by valuing the underlying exploration licence.

$3.8.3$ Valuation Summary

The total Technical Value for NuStar's mineral assets as at 30 September 2004 is presented in Table 3.9.

	Value of NuStar's Interest
		Range	Preferred
	Low	High
	A\$M	ASM	ASM
Paulsens Project - Post Tax	9.1	17.1	14.6
Exploration Portfolio	1.2		14
Total	10.3	18.8	16.0

Table 3.9 Summary of Technical Value of NuStar's Mineral Assets

3.9 Previous Valuations

A valuation of mineral assets held by SBM and NuStar was carried out by AMC in March 2001 as part of a Specialist report.

The valuations for NuStar totalled \$14.4M to \$24.9M with a preferred value \$19.9M. Since that valuation, further drilling has been carried out at Paulsens, the resource re-estimated and mining methods reevaluated. The project has been re-designed with a lower planned mining and treatment rate. The gold price has increased significantly. The portfolio of exploration tenements has changed significantly. Accordingly AMC considers that the 2001 valuation of SBM is no longer applicable.

A valuation of NuStar was prepared in October 2003 by a mining industry consultant.

The 2003 valuation for NuStar totalled \$5.76M to \$21.24M with a preferred value \$8.43M. Since that valuation, further drilling has been carried out at Paulsens, the resource re-estimated and mining methods re-evaluated. A mining study has been carried out on the revised resource estimate and project implementation started. AMC considers that the 2003 valuation of NuStar is no longer applicable.

$\overline{\mathbf{4}}$ SOURCES OF INFORMATION

The information on which this report is based has been gathered by AMC during site visits to Paulsens and Meekatharra and in offices of SBM and NuStar, Perth.

For each project we have reviewed recent reports, where available, on resource and reserve procedures and results, exploration reports, feasibility and other engineering/economic reports on existing and/or planned mining operations, environmental reports, reports on process plants and relevant testwork and any other material.

We have also referred to published quarterly reports and other Australian Stock Exchange ("ASX") releases of SBM and NuStar.

$\overline{5}$ QUALIFICATIONS

AMC is a firm of mineral industry consultants whose activities include the preparation of due diligence reports and reviews on mining and exploration projects for equity and debt funding and for public reports.

The contributors to the SBM section of the report are:

G R Appleyard BSc (Hons), BA, a Director of AMC with more than 35 years experience in the mining and mining investment industries, who has coordinated and managed the assessment, reviewed resources and reserves and exploration potential and carried out the valuations.
L J Gillett BE (Min), Dip Geosc (Min Econ), M AusIMM, M MICA, AMC Director with more than 25 years experience in the mining industry, who has undertaken an internal AMC review of this report.

The contributors to the NuStar section of the report are:

D Carville BSc (Hons) Geol, M AusIMM, M GSA, AMC Senior Resource Geologist with more than 25 years experience in the mining industry with more than five of those years in resource and ore reserve estimation, who has reviewed geology, resource, and exploration issues.
P Cunningham BE (Hons) (Min), AMC Principal Mining Engineer with more than 25 years experience in the mining industry, who has reviewed the ore reserve and mining aspects.
A Brown, an independent metallurgical consultant with more than 35 years in the mining industry who has reviewed metallurgy, treatment and infrastructure aspects as a sub-consultant to AMC.
L J Gillett, who has undertaken an internal AMC review of this report.

AMC has not carried out any consulting assignments for SBM in the past two years. AMC is providing specialist consulting services to NuStar on mine ventilation under normal terms of engagement for which it is paid standard consulting fees. AMC previously prepared valuations of SBM and NuStar in March 2001. AMC has not carried out consulting assignments for Deloitte in the past two years.

In all of its assignments, AMC and its subconsultants have acted as independent parties. Neither AMC nor the contributors to this report have any interests in SBM or NuStar or in the proposed transaction subject of this report that could be reasonably construed to affect their independence. AMC has no pecuniary interest, association or employment relationship with SBM and NuStar or Deloitte. AMC is satisfied that Resource Mapping Pty Limited, which prepared an independent report on the standing of the material tenements held by SBM and NuStar, is an independent and qualified party.

Neither AMC nor the contributors to this report or members of their immediate families hold shares in SBM or NuStar. An AMC employee who is not a contributor to this report holds a small parcel of SBM shares. AMC is being paid a fee according to its normal per diem rates and out of pocket expenses in the preparation of this report. Its fee is not contingent on the outcome of the transaction subject to this report.

In our letter of engagement, SBM agreed to comply with those Obligations of the Commissioning Entity under the Valmin Code as set out in paragraphs 27 to 29 of that code, including that to the best of its knowledge and understanding, complete, accurate and true disclosure of all relevant material information has been made.

In preparing this report we have relied on information provided to us by SBM and NuStar and have no reason to believe that information is materially misleading or incomplete or contains any material errors. SBM and Deloitte have been provided with a draft of this report for correction of any material errors of fact or noting of any material omissions.

This report and the conclusions in it are effective at 30 September 2004. SBM has advised AMC that there have been no material changes in the assets or the matters reported which would impact on the conclusions and values herein. Those conclusions may change in the future with changes in relevant metal prices, exploration and other technical developments in regard to the projects and the market for mineral properties.

SBM has provided AMC with an indemnity in regard to damages, losses and liabilities related to or arising out of our engagement other than those arising from illegal acts, bad faith or negligence on our part or our reliance on unauthorised statements from third parties.

AMC has given its consent to the release of this report as an attachment to the Expert's Report prepared by Deloitte. Neither this report nor any part of it may be used for any other purpose without our written consent.

The contributors to this report are corporate members of the AusIMM and bound by its Code of Ethics.

APPENDIX A

Tenements held by SBM

Project			Tenements				Area km ²	Expenditure
100% SBM
Bourkes Find	M 51/530	M 51/562	M 51/563	M 51/564	M 51/565		39.3	458,638
Mikhaburra	P 51/1553						1.9	7,897
Burnakura	M 51/422	M 51/423	M 51/424	M 51/468	M 51/469		45.2	527,912
Quinns	M 51/19 M 51/532 P 51/1747 P 51/1918 P 51/2045	M 51/475 M 51/533 P 51/1920	M 51/476 M 51/534 P51/1913 P51/1914 P 51/1921	M 51/505 M 51/574 P 51/1984	M 51/527 M 51/72 P 51/1915 P 51/1985	M 51/531 P 51/1746 P 51/1917 P 51/1986	41.3	384,153
Wanganui	M 51/377		P51/1775 P51/1776 P51/1777				8.3	53,069
Paddys Flat	M 51/200	M 51/437	M 51/438	M 51/439	M 51/440		41.2	481,885
Annean JV (Aurogenie) Abbotts	M 51/390	E 51/283					0.6	31,274
Aladdiin	M 51/320	M 51/62	M 51/795	M 51/819	M 51/820		0.5	46,318
Bailey Island	M 51/12	M 51/321	M 51/793	M 51/794	M 51/96		0.4	41,295
Caledonian	M 51/31	M 51/33					2.9	41,175
Chanderloo	M 51/79						2.4	28,389
Highway	M 51/256	M 51/257	M 51/503				17.9	209,342
Kurara East	£51/814 P 51/2039	M 51/454 P 51/2040	M 51/455		M 51/456 P 51/2037 P 51/2038		26.4	261,152
Meekatharra Project	M 51/199 P 51/1809 P 51/1865 P 51/1878 P 51/1884 P 51/1890	M 51/504 P 51/1836 - P 51/1879 - P 51/1891	M 51/521 P 51/1860 P 51/1867 P 51/1869 P 51/1880 P 51/1885 P 51/1886 P 51/1892	P 51/1861 P 51/1871 P 51/1881 P 51/1887 P 51/1893	P 51/1764 P 51/180E P 51/1862 P 51/1882 P 51/1888 P 51/1894	P 51/1808 P 51/1863 P 51/1875 P 51/1876 P 51/1883 P 51/1889 P51/1859	55.9	271,932
Nanníne	M 51/334 M 51/482 M 51/53 P 51/1628 P 51/1642 P 51/1656 P 51/1796 P 51/1823 P 51/2056	M 51/374 M 51/486 $M$ 51/6 P 51/1646 P 51/1657 P 51/1824 P 51/2057	M 51/447 M 51/496 M 51/75 P 51/1637 P 51/1638 P 51/1647 P 51/1658 P 51/1797 P 51/1798 P 51/1799 P 51/1825 P 51/2058	M 51/462 M 51/51 P 51/1581 P 51/1639 P 51/1648 P 51/1788 P 51/1990 P 51/2059	M 51/463 M 51/523 P 51/1582 P 51/1640 P 51/1649 P 51/1789 P 51/1818 P 51/2024 P 51/2061	M 51/472 M 51/524 P 51/1583 P 51/1641 P 51/1650 P 51/1795 P 51/1822 P 51/2036 P 51/2062	82.5	690,430
Norie	M 51/477 M 51/525 P 51/1721	M 51/492	M 51/493 P 51/1991	M 51/494 M 51/526 P 51/1717 P 51/1718 P 51/1719	M 51/495	M 51/501 P 51/1720	60.8	620,166
South East Meekatharra	M 51/445 P 51/2326	M 51/446	M 51/487	M 51/488		M 51/490 P 51/1987	28.2	321,857
South Junction	M 51/132	M 51/393	M 51/491	M 51/539			23.3	276,464
Stakewell	M 51/368	M 51/448	M 51/449	M 51/450	M 51/552	P 51/1683	19.8	239.587
Three Sisters	M 51/203						0.9	H,481
Tuckanarra	M 20/239	M 20/240	M 20/241	M 20/242	M 20/47		36.2	448,738
Turn of the Tide	E 51/348	M 51/237					9.5	130,807
Yaloginda	M 51/161 M 51/27 M 51/385 M 51/441 M 51/516 P 51/1607 P 51/1820 P 51/1910	M 51/180 M 51/28 M 51/386 M 51/471 M 51/528 P 51/1723 P 51/1903 P 51/1992	M 51/187 M 51/280 M 51/409 M 51/485 M 51/560 P 51/1732 P 51/1904 P 51/2185	M 51/190 M 51/281 M 51/418 M 51/489 M 51/91 P 51/1750 P 51/1907 P 51/2186	M 51/209 M 51/325 M 51/419. M 51/500 P 51/1605 P 51/1755 P 51/1908 P 51/2187	M 51/211 M 51/35 M 51/433 M 51/502 P 51/1606 P 51/1760 P 51/1909 P 51/2188	69.5	747,676

Project			Tenements				Area $\mathrm{km}^2$	Expenditure
Chesterfield JV (IG / Aarex) Chesterfield	E 51/830	E 51/917	M 51/270	M 51/353	M 51/451	P 51/1441	3.7	113,202
Polelle JV (Elara) Burnakura	M 51/465						9.2	107,475
Polelle	E 51/259 P 51/1925	M 51/427 P 51/2327	M 51/459 E 51/615	M 51/643	M 51/797	M 51/803	34.8	59,558
Reedys JV (Elara) Kurara East	M 51/235	M 51/381					3.0	34.813
Reedys	£20/189 M 20/215 M 20/45 M 51/92 P 20/1791	£20/440 M 20/219 M 20/68	E 51/314 M 20/303 M 20/69	M 20/12 M 20/306 M 20/77	M 20/212 M 20/308 M 51/233	M 20/214 M 20/446 M 51/396	71.1	933,603
Tough Go	M 20/73	M 51/254					17.0	201,936
Turn of the Tide	M 20/107	M 20/249	M 20/309	M 20/70	M 20/71	M 51/236	49.5	596,421
Cue JV (Cougar) Cue	GML 20/2624 M 20/2 M 20/243 M 20/63 P 20/1496 P 20/1631	$M$ 20/1 M 20/201 $M$ 20/3 P 20/1424 P 20/1499	$M$ 20/10 M 20/213 M 20/35 P 20/1486 P 20/1501	M 20/18 M 20/23 M 20/4 P 20/1487 P 20/1604	M 20/187 M 20/233 M 20/5 P 20/1490 P 20/1623	M 20/189 M 20/24 M 20/62 P 20/1492 P 20/1624	13.6	237,271
Kalgoorlie - 100% SBM Boorara	P 26/2981	P 26/2983					2.1	8,880
Kałgoorlie - 75% SBM Balagundi	P 25/1284						1.9	8.064
Pelican Joint Ventare SBM earning 70%	E 08/853	E 08/854					113.8	114
TOTAL								8,378,645

APPENDIX B

Tenements held by NuStar

Tenement	Granted Area (km ² )	Granted	Expires	Total Expenditure Commitment (Current Year) ¹
Paulsens				\$144,842
M08/0099	1.8	14/02/90	13/02/11
M08/0196	8.0	03/03/99	02/03/20
E08/0665	72.7	15/11/93	14/11/04 conversion to Ms
Paulsens Exploration				\$219,518
E 08/906	60.0	7/11/96	6/11/04
E 47/977	12.6	18/10/99	17/10/04
M 08/222	2.2	24/08/00	23/08/21
E 08/1125	37.9	25/05/00	24/05/05
E 08/1186	28.4	4/09/03	3/09/08
E 47/1134	37.9	6/01/03	5/01/08
E 47/1135	15.8	6/01/03	5/01/08
P 08/490	2.0	28/02/03	27/02/07
E 08/1191	9.5	20/10/03	19/10/08
Ashburton Exploration				\$569,843
M 08/191	8.2	10/05/99	9/05/20
M 08/192	7.6	10/05/99	9/05/20
M 08/193	7.1	10/05/99	9/05/20
M 08/194	8.6	10/05/99	9/05/20
E 08/1256	177.0	7/07/03	6/07/08
E 08/1096	19.0	10/04/00	9/04/05
E 08/1073 E 08/1127	110.6 12.6	22/05/00 25/05/00	21/05/05 24/05/05
M 08/189	390.7	10/05/99
Emily Well
M 20/458	8.1	2002		Not applicable
		Application

$1$ Including rates and rents.

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Proxy Form

St Barbara Mines Limited

ABN 36 009 165 066

Mark this box with an "X" if you have made any changes to your address details (see reverse)

All correspondence to: Advanced Share Registry Services 7^% Floor 200 Adelaide Terrace Perth Western Australia 6000 Australia Enquiries (within Australia) 08 9221 7288 (outside Australia) 61 8 9221 7288 Facsimile 61 8 9221 7869 www.asrshareholders.com

Appointment of Proxy

MVe heing a member/s of St Barbara Mines Limited and entitled to attend and vote hereby appoint

the Chairman of the Meeting OR (mark with an 'X')

If you are not appointing the Chairman of the Meeting as your proxy please write here the full name of the individual or body corporate (excluding the registered security holder) you are appointing as your proxy.

or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at the meeting on my/our behalf and to yote in accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the Annual General Meeting of St Barbara Mines Limited to be held at Level 8, Exchange Plaza, 2 The Esplanade, Perth, Western Australia on Monday 29 November 2004 at 3.00pm and at any adjournment of that meeting.

IMPORTANT: FOR RESOLUTIONS 3, 4, 5, 6, 7, 9 and 10 BELOW

As required by ASX Listing Rule 14.2.3, if the Chairman of the Meeting is your nominated proxy, or may be appointed by default, and you have not directed your proxy how to vote on resolutions 3, 4, 5, 6, 7, 9 and 10 below, please place a mark in this box. By marking this box you acknowledge that the Chairman of the Meeting may exercise your proxy even if he has an interest in the outcome of the resolutions and that votes cast by him, other than as proxy holder, would be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chairman of the Meeting will not cast your vote on resolutions 3, 4, 5, 6, 7, 9 and 10 and your vote will not be counted in computing the required majority if a poll is called on those resolutions. The Chairman of the Meeting intends to vote undirected proxies in favour of resolutions 3, 4, 5, 6, 7, 9 and 10.

Voting directions to your proxy - please mark $\boxtimes$ to indicate your directions

		For	Against	Abstain*
Resolution 1.	Re-election of Director - H. G. Tuten
Resolution 2.	Re-election of Director - M. K. Wheatley
Resolution 3.	Ratification of share issue
Resolution 4.	Ratification of share issue
Resolution 5.	Ratification of share issue
Resolution 6.	Approval of share issue
Resolution 7.	Approval of surrender of Paulsens Royalty
Resolution 8.	Approval of Buy -back Offer
Resolution 9.	Approval of issue of initial options to Eduard Eshuys
Resolution 10	Approval of issue of further options to Eduard Eshuys

In addition to the intention advised above, the Chairman of the Meeting intends to vote undirected proxies in favour of each of the oth erresolutions.

*If you mark the Abstain box for a particular resolution, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

PLEASE SIGN HERE This section must be signed in accordance with the instructions overleaf to enable your directions to be implemented. Individual or Security Holder 1 Security Holder Security Holder 3

Contact Name		,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, Contact Daytime Telephone	Date
Sole Director and Sole Company Secretary	Director		Director/Company Secretary
5838888886658958958888958888888888888888 . ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	*###################################### ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,		********* ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

How to complete the Proxy Form

1 Your Address

This is your address as it appears on the company's share register. If this information is incorrect, please mark the box and make the correction on the form. Security holders sponsored by a broker (in which case your reference number overteal will commence with an 'x') should advise your broker of any changes. Please note, you cannot change ownership of your securities using this form.

$\overline{2}$ Appointment of a Proxy

If you wish to appoint the Chairman of the Meeting as your proxy, mark the box. If the individual or body corporate you wish to appoint as your proxy is someone other than the Chairman of the Meeting please write the full name of that individual or body corporate. If you leave .
this section blank, or your named proxy does not attend the meeting, the Chairman of the Meeting will be your proxy. A proxy need not be a security holder of the company. Do not write the name of the issuer company or the registered security holder in the space.

$\overline{\mathbf{3}}$ Votes on Resolutions

You may direct your proxy how to vote by placing a mark in one of the boxes opposite each resolution. All your securities will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any resolution by inserting the percentage or number of securities you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on a given resolution, your proxy may vote as he or she chooses. If you mark more than one box on a resolution your vote on that resolution will be invalid.

4 Appointment of a Second Proxy

You are entitled to appoint up to two proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning the company's share registry or you may copy this form.

To appoint a second proxy you must:

on each of the first Proxy Form and the second Proxy Form state the percentage of your voting rights or number of securities $(a)$ applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded.
$(b)$ return both forms together in the same envelope.

5 Signing Instructions

You must sign this form as follows in the spaces provided:

Individual:	where the holding is in one name, the holder must sign.
Joint Holding:	where the holding is in more than one name, all of the security holders should sign.
Power of Attorney:	to sign under Power of Attorney, you must have already lodged this document with the registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attomey to this form when you return it.
Companies:	where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.

If a representative of a corporate security holder or proxy is to attend the meeting the appropriate "Certificate of Appointment of Corporate Representative" should be produced prior to admission. A form of the certificate may be obtained from the company's share registry.

Lodgement of a Proxy

This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below not later than 3.00pm (Perth time) on 27 November 2004. Any Proxy Form received after that time will not be valid for the scheduled meeting.

Documents may be lodged using the reply paid envelope or:

verge ur.
IN PERSON	Registered Office - Level 2, 16 Ord Street, WEST PERTH WA 6005 Australia
	Share Registry - Advanced Share Registry Services, 7 ^th Floor, 200 Adelaide Tenace, PERTH WA 6000 Australia
BY MAIL	Registered Office - Level 2, 16 Ord Street, WEST PERTH WA 6005 Australia
	Share Registry - Advanced Share Registry Services, PO Box 6283, EAST PERTH WA 6892 Australia
BY FAX	61 8 9221 7869

AI assistant

ST BARBARA LIMITED — AGM Information 2004

65749_rns_2004-10-26_88e0c503-ccb6-4146-9915-3cca22699bfe.pdf

......................................

Notice of Annual General kv reteritet ancie de l'antication

Meeting Documentation Impolate Charges

The Existent Notice

Important Notices

Read this document

Role of ASIC and ASX

Taxation matters

Future statements

Defined terms

Table of contents

Annual General Meeting - Perth, 29 November 2004

(the Proposal).

The Independent Expert's Report has concluded that the surrender of the Paulsens Royalty is fair and reasonable to St Barbara's shareholders and a copy of that report is enclosed.

On behalf of the Board, I recommend that you vote in favour of each resolution to be considered at the Annual General Meeting.

Summary of the Proposal

The Proposal

Benefits of the Proposal

What You Should Do

Step 1

Read this Meeting Documentation

Step 2

Vote on the resolution

Questions

Key Dates

Notice of Annual General Meeting

Agenda

Ordinary Business

Financial Report

Resolution 1 - Re-election of Director

Resolution 2 - Re-election of Director

Special Business

Resolution 3 - Ratification of share issue

Resolution 4 - Ratification of share issue

Resolution 5 - Ratification of share issue

Resolution 6 - Approval of share issue

Resolution 7 - Approval of surrender of Paulsens Royalty

Resolution 8 - Approval of Buy-back Offer

Resolution 9-Approval of issue of initial options to Eduard Eshuys

Resolution 10 - Approval of issue of further options to Eduard Eshuys

Explanatory Memorandum and Independent Expert's Report

Entitlement to vote

Snapshot date

Voting entitlement

Proxies

By Order of the Board

1 Purpose of this Document

2 Overview of the Proposal

2.1 Initial sale of NuStar Shares

2.2 Divestment of interest in Paulsens Project

2.3 Grant of option to Claymore Capital

2.4 Buy-back Offer

3 Advantages and disadvantages of the Proposal

3.1 Benefits of the Proposal

Financial henefits

Focus on controlled businesses

St Barbara issued capital

Explanatory Memorandum

Future potential

3.2 Arguments against the Proposal

Loss of control of NuStar

Reduced exposure to NuStar

3.3 Other factors

Increased shareholding of RCF

4 Independent Expert's opinion and Directors' recommendation

4.1 Independent Expert's opinion

4.2 Director's recommendation

5 Resolutions 1 and 2 - Re-election of Directors

5.1 Henderson G Tuten

5.2 Mark K Wheatley

6 Resolutions 3 to 5 – Ratification of share issues

6.1 Resolution 3 - Issue of St Barbara Shares to RCF

6.2 Resolution 4 - Issue of St Barbara Shares to Ocean

6.3 Resolution 5 - Issue of St Barbara Shares to other parties

7 Resolution $6$ – Approval of share issue

8 Resolution 7 - Approval of surrender of Paulsens Royalty

8.1 Surrender of Paulsens Royalty

ST BARBARA LIMITED AGM Information 2004

$1.2^°$ Construction